IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpdc/0409015.html
   My bibliography  Save this paper

Corruption and Firm Performance in Africa

Author

Listed:
  • John McArthur

    (Centre for the Study of African Economies)

  • Francis Teal

    (Centre for the Study of African Economies)

Abstract

This paper uses survey data to investigate empirically the importance of corruption in determining firm performance in Africa. We allow for the possibility of perception bias on the part of the respondents and for corruption being endogenous. We find that corruption is linked to significant adverse effects on firm performance in two ways. At the firm (or ^Slocal^T) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economywide (or ^Sglobal^T) level, firms in countries with pervasive corruption are some 70 per cent less efficient than firms in countries free of corruption. We thus provide evidence that competitive uncoordinated local corruption has substantial global effects.

Suggested Citation

  • John McArthur & Francis Teal, 2004. "Corruption and Firm Performance in Africa," Development and Comp Systems 0409015, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpdc:0409015
    Note: Type of Document - pdf; pages: 32
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/dev/papers/0409/0409015.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    3. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    4. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    5. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    6. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-1023, October.
    7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    8. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    10. Shang-Jin Wei & Yi Wu, 2002. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 461-506, National Bureau of Economic Research, Inc.
    11. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    12. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    13. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    14. Shang-Jin Wei, 2000. "Corruption, composition of capital flows, and currency crises," Policy Research Working Paper Series 2429, The World Bank.
    15. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
    16. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francis Teal & John McArthur, 2002. "Corruption and Firm Performance in Africa," Economics Series Working Papers WPS/2002-10, University of Oxford, Department of Economics.
    2. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    3. Stéphane Straub, 2000. "Factores determinantes empíricos de las buenas instituciones: ¿sabemos algo a ciencia cierta?," Research Department Publications 4216, Inter-American Development Bank, Research Department.
    4. Fenske, James, 2010. "Institutions in African history and development: A review essay," MPRA Paper 23120, University Library of Munich, Germany.
    5. Stéphane Straub, 2000. "Empirical Determinants of Good Institutions: Do We Know Anything?," Research Department Publications 4215, Inter-American Development Bank, Research Department.
    6. Rasha Hashim Osman & Constantinos Alexiou & Persefoni Tsaliki, 2012. "The role of institutions in economic development: Evidence from 27 Sub-Saharan African countries," International Journal of Social Economics, Emerald Group Publishing, vol. 39(2), pages 142-160, January.
    7. Sambit Bhattacharyya, 2011. "Growth Miracles and Growth Debacles," Books, Edward Elgar Publishing, number 13609.
    8. Abdoul' Ganiou Mijiyawa, 2013. "Africa's Recent Economic Growth: What Are the Contributing Factors?," African Development Review, African Development Bank, vol. 25(3), pages 289-302, September.
    9. Graf Lambsdorff, Johann, 2005. "Consequences and causes of corruption: What do we know from a cross-section of countries?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-34-05, University of Passau, Faculty of Business and Economics.
    10. Eslamloueyan, Karim & Jafari, Mahboubeh, 2019. "Do better institutions offset the adverse effect of a financial crisis on investment? Evidence from East Asia," Economic Modelling, Elsevier, vol. 79(C), pages 154-172.
    11. Eugen Dimant & Guglielmo Tosato, 2018. "Causes And Effects Of Corruption: What Has Past Decade'S Empirical Research Taught Us? A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 335-356, April.
    12. Méon, Pierre-Guillaume & Weill, Laurent, 2010. "Is Corruption an Efficient Grease?," World Development, Elsevier, vol. 38(3), pages 244-259, March.
    13. Alberto Chong & Luisa Zanforlin, 2004. "Inward-Looking Policies, Institutions, Autocrats, and Economic Growth in Latin America: An Empirical Exploration," Public Choice, Springer, vol. 121(3), pages 335-361, February.
    14. Laurens Cherchye & Wim Moesen, 2003. "Institutional Infrastructure and Economic Performance: Levels versus Catching Up and Frontier Shifts," Public Economics Working Paper Series ces0314, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    15. Andreas Assiotis & Kevin Sylwester, 2013. "Do the effects of corruption upon growth differ between democracies and autocracies?," University of Cyprus Working Papers in Economics 06-2013, University of Cyprus Department of Economics.
    16. Pierre-Guillaume Méon & Khalid Sekkat, 2007. "Revisiting the relationship between governance and foreign direct investment," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 41-61.
    17. Eatzaz Ahmad & Muhammad Aman Ullah & Muhammad Irfanullah Arfeen, 2012. "Does Corruption Affect Economic Growth?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 49(2), pages 277-305, November.
    18. Holger Strulik, 2008. "Social composition, social conflict and economic development," Economic Journal, Royal Economic Society, vol. 118(530), pages 1145-1170, July.
    19. Mitchener, Kris James & McLean, Ian W, 2003. "The Productivity of US States since 1880," Journal of Economic Growth, Springer, vol. 8(1), pages 73-114, March.

    More about this item

    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Political Economy and Comparative Economic Systems

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0409015. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.