Kiel Working Papers, Kiel Institute for World Economics
No 1632:
Corruption and Productivity Firm-level Evidence from the BEEPS Survey
Donato De Rosa, Nishaal Gooroochurn and Holger Görg
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 defined as a “bribe tax” and is compared to
another form of institutional inefficiency, which is often believed to be
closely linked with corruption: the “time tax” imposed on firms by red
tape. When testing their effects in the full sample, only the bribe tax
appears to have a negative effect on firm-level productivity, while the
effect of the time tax is insignificant. At the same time, there is 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 the sample is split between EU and non-EU countries, the time tax
turns out to have a negative effect only in EU countries and the bribe tax
only in non-EU countries. This suggests that the institutional environment
influences the way in which firm behaviour affects firm performance. In
particular, the impact of bribing for individual firms appears to vary
depending on overall institutional quality: in countries where corruption
is more prevalent and the legal framework is weaker, bribery is more
harmful for firm-level productivity
Keywords: Keywords: corruption, firm performance, productivity, bribe tax; (follow links to similar papers)
JEL-Codes: O14,; P37; (follow links to similar papers)
44 pages, June 2010
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