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How bribery distorts firm growth : differences by firm attributes

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  • Seker, Murat
  • Yang, Judy S.

Abstract

How corruption affects economic performance has been studied for over a decade. Yet the lack of detailed firm-level data has limited research regarding who is carrying the real burden of corruption. This study shows that for firms in the Latin America and Caribbean region, bribery significantly distorts firm growth. Firms that pay bribes when conducting business transactions -- such as applying for permits, electricity, or water connections -- have 24 percent lower annual sales growth than firms that do not face such solicitations. Moreover, these distortions are more severe for low-revenue-generating and young firms. Using the instrumental variables method, the authors show that these results are robust to different specifications and the use of different sub-samples.

Suggested Citation

  • Seker, Murat & Yang, Judy S., 2012. "How bribery distorts firm growth : differences by firm attributes," Policy Research Working Paper Series 6046, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6046
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Emma Galli & Danilo Valerio Mascia & Stefania Patrizia Sonia Rossi, 2018. "Does Corruption Influence the Self-Restraint Attitude of Women-led SMEs towards Bank Lending?," CESifo Economic Studies, CESifo, vol. 64(3), pages 426-455.
    3. Jain, Ritika, 2020. "Bribery and firm performance in India: A political economy perspective," Journal of Asian Economics, Elsevier, vol. 68(C).
    4. Tian, Ni & Zhang, Zongyi, 2018. "How do anticorruption measures affect executive incentive?," Finance Research Letters, Elsevier, vol. 24(C), pages 179-185.
    5. Shusen Qi & Steven Ongena, 2019. "Will Money Talk? Firm Bribery and Credit Access," Financial Management, Financial Management Association International, vol. 48(1), pages 117-157, March.
    6. Irfan Kurniawan & Riyanto, 2020. "Should I Bribe? Re-Examining the Greasing-the-Wheels Hypothesis in Democratic Post-Soeharto Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 66, pages 123-140, December.

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    More about this item

    Keywords

    Public Sector Corruption&Anticorruption Measures; E-Business; Microfinance; Corruption&Anticorruption Law; Access to Finance;
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