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Corruption and productivity : firm-level evidence from the BEEPS survey

Author

Listed:
  • De Rosa, Donato
  • Gooroochurn, Nishaal
  • Gorg, Holger

Abstract

Using enterprise data for the economies of Central and Eastern Europe and the CIS, this study examines the effects of corruption on productivity. Corruption is narrowly defined as the occurrence of informal payments to government officials to ease the day-to-day operation of firms. The effects of this"bribe tax"on productivity are compared to the consequences of red tape, which may be understood as imposing a"time tax"on firms. When testing effects in the full sample, only the bribe tax appears to have a negative impact on firm-level productivity, while the effect of the time tax is insignificant. At the same time, unlike similar studies using country-level data, firm level analysis allows a direct test of the"efficient grease"hypothesis by investigating whether corruption may increase productivity by helping reduce the time tax on firms. Results provide no evidence of a trade-off between the time and the bribe taxes, implying that bribing does not emerge as a second-best option to achieve higher productivity by helping circumvent cumbersome bureaucratic requirements. When controlling for EU membership the effects of the bribe tax are more harmful in non-EU countries. This suggests that the surrounding environment influences the way in which firm behaviour affects firm performance. In particular, in countries where corruption is more prevalent and the legal framework is weaker, bribery is more harmful for firm-level productivity.

Suggested Citation

  • De Rosa, Donato & Gooroochurn, Nishaal & Gorg, Holger, 2010. "Corruption and productivity : firm-level evidence from the BEEPS survey," Policy Research Working Paper Series 5348, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5348
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    Cited by:

    1. Paunov, Caroline, 2016. "Corruption's asymmetric impacts on firm innovation," Journal of Development Economics, Elsevier, vol. 118(C), pages 216-231.
    2. Simplice Asongu & Oasis Kodila-Tedika, 2016. "Fighting African conflicts and crimes: which governance tools matter?," International Journal of Social Economics, Emerald Group Publishing, vol. 43(5), pages 466-485, May.
    3. repec:spt:apfiba:v::y:2018:i::f:8_2_4 is not listed on IDEAS
    4. Asongu, Simplice A. & Kodila-Tedika, Oasis, 2013. "Crime and conflicts in Africa: consequences of corruption?," European Economic Letters, European Economics Letters Group, vol. 2(2), pages 50-55.
    5. Sandra Blagojevic & Jože P.Damijan, 2012. "Impact of Private Incidence of Corruption and Firm Ownership on Performance of Firms in Central and Eastern Europe," LICOS Discussion Papers 31012, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    6. Fungáčová, Zuzana & Kochanova, Anna & Weill, Laurent, 2015. "Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt," World Development, Elsevier, vol. 68(C), pages 308-322.
    7. Stefan Borsky & Esther Blanco, 2014. "Setting one voluntary standard in a heterogeneous Europe - EMAS, corruption and stringency of environmental regulations," Working Papers 2014-29, Faculty of Economics and Statistics, University of Innsbruck.
    8. Addis G. Birhanu & Alfonso Gambardella & Giovanni Valentini, 2016. "Bribery and investment: Firm-level evidence from Africa and Latin America," Strategic Management Journal, Wiley Blackwell, vol. 37(9), pages 1865-1877, September.
    9. Valerija Botrić & Ljiljana Božić, 2015. "Innovators' vs Non-innovators' perceptions of corruption in European post-transition economies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 8(3), pages 47-58, December.
    10. Simplice A Asongu, 2015. "A Good Turn Deserves Another: Political Stability, Corruption and Corruption-Control," Economics Bulletin, AccessEcon, vol. 35(4), pages 2037-2048.
    11. repec:spt:apfiba:v:8:y:2018:i:2:f:8_2_4 is not listed on IDEAS
    12. Cooray, Arusha & Dzhumashev, Ratbek & Schneider, Friedrich, 2017. "How Does Corruption Affect Public Debt? An Empirical Analysis," World Development, Elsevier, vol. 90(C), pages 115-127.
    13. Colin C. Williams & Alvaro Martinez-Perez, 2016. "Evaluating the impacts of corruption on firm performance in developing economies: an institutional perspective," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 16(4), pages 401-422.
    14. Jiang, Ting & Nie, Huihua, 2014. "The stained China miracle: Corruption, regulation, and firm performance," Economics Letters, Elsevier, vol. 123(3), pages 366-369.
    15. Wu, Jie & Wang, Chengqi & Hong, Junjie & Piperopoulos, Panagiotis & Zhuo, Shuaihe, 2016. "Internationalization and innovation performance of emerging market enterprises: The role of host-country institutional development," Journal of World Business, Elsevier, vol. 51(2), pages 251-263.
    16. Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 1-13.
    17. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
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      ," MPRA Paper 41482, University Library of Munich, Germany.

    More about this item

    Keywords

    Environmental Economics&Policies; Public Sector Corruption&Anticorruption Measures; Political Economy; Economic Theory&Research; Emerging Markets;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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