IDEAS home Printed from https://ideas.repec.org/a/nea/journl/y2020i47p40-65.html
   My bibliography  Save this article

Influence of regulatory burden and involvement of business in corruption on revenue: Grease vs sand effect

Author

Listed:
  • Malkina, M.

    (Lobachevsky State University of Nizhni Novgorod, Nizhni Novgorod, Russia)

  • Ovchinnikov, V.

    (Financial Research Institute of the Ministry of Finance of the Russian Federation, Moscow, Russia
    Lobachevsky State University of Nizhni Novgorod, Nizhni Novgorod, Russia)

Abstract

The study is devoted to theoretical analysis and empirical assessment of the impact of bureaucratic burden and participation of firms in corruption on their financial results (in our case, revenue). We test alternative hypotheses about the positive ("grease the wheels") and negative ("sand the wheels") result of legal, illegal and mixed interaction of business with government bodies. Our study is based on the 2014 BEEPS-V data on enterprises of the former Socialist countries and Turkey. We proposed and evaluated three specifications for Cobb-Douglas type models, which included test, control, and instrumental variables. The obtained results evidenced the prevalence of the effect of "grease the wheels" over the effect of "sand the wheels" - separately for corrupt and legal intensive interaction of business with the authorities, where the model of illegal interaction proved to be more effective. At the same time, in the mixed type model, we found the negative effect of the joint influence of bureaucratic barriers and the participation of firms in corruption. We explained this by the double costs for firms when they are plunged into corruption after inefficient interaction with the state bodies, as well as various strategies for such interaction.

Suggested Citation

  • Malkina, M. & Ovchinnikov, V., 2020. "Influence of regulatory burden and involvement of business in corruption on revenue: Grease vs sand effect," Journal of the New Economic Association, New Economic Association, vol. 47(3), pages 40-65.
    • Handle: RePEc:nea:journl:y:2020:i:47:p:40-65
    DOI: 10.31737/2221-2264-2020-47-3-2
    as

    Download full text from publisher

    File URL: http://www.econorus.org/repec/journl/2020-47-40-65r.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.31737/2221-2264-2020-47-3-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Takahiro Sato & Atsushi Kato, 2014. "Greasing the Wheels? The Effect of Corruption in Regulated Manufacturing Sectors of India," Discussion Paper Series DP2014-07, Research Institute for Economics & Business Administration, Kobe University.
    2. Axel Dreher & Martin Gassebner, 2013. "Greasing the wheels? The impact of regulations and corruption on firm entry," Public Choice, Springer, vol. 155(3), pages 413-432, June.
    3. Lambsdorff, Johann Graf, 2002. "Corruption and Rent-Seeking," Public Choice, Springer, vol. 113(1-2), pages 97-125, October.
    4. Dong, Zhiqiang & Wei, Xiahai & Zhang, Yongjing, 2016. "The allocation of entrepreneurial efforts in a rent-seeking society: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 353-371.
    5. 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.
    6. Kalyuzhnova, Yelena & Belitski, Maksim, 2019. "The impact of corruption and local content policy in on firm performance: Evidence from Kazakhstan," Resources Policy, Elsevier, vol. 61(C), pages 67-76.
    7. Athanasouli, Daphne & Goujard, Antoine, 2015. "Corruption and management practices: Firm level evidence," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1014-1034.
    8. Sandra Blagojević & Jože P. Damijan, 2013. "The impact of corruption and ownership on the performance of firms in Central and Eastern Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 25(2), pages 133-158, June.
    9. Capasso, Salvatore & Santoro, Lodovico, 2018. "Active and passive corruption: Theory and evidence," European Journal of Political Economy, Elsevier, vol. 52(C), pages 103-119.
    10. Zakharov, Nikita, 2019. "Does corruption hinder investment? Evidence from Russian regions," European Journal of Political Economy, Elsevier, vol. 56(C), pages 39-61.
    11. Colin C. Williams & Abbi M. Kedir, 2016. "The Impacts Of Corruption On Firm Performance: Some Lessons From 40 African Countries," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 1-18, December.
    12. Nur-tegin, Kanybek & Jakee, Keith, 2020. "Does corruption grease or sand the wheels of development? New results based on disaggregated data," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 19-30.
    13. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
    14. Ronald U. Mendoza & Ricardo A. Lim & Anne Ong Lopez, 2015. "Grease or Sand in the Wheels of Commerce? Firm Level Evidence on Corruption and SMES," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(4), pages 415-439, 05-27.
    15. Xu, Gang & Zhang, Dongyang & Yano, Go, 2017. "Can corruption really function as “protection money” and “grease money”? Evidence from Chinese firms," Economic Systems, Elsevier, vol. 41(4), pages 622-638.
    16. Fisman, Raymond & Svensson, Jakob, 2007. "Are corruption and taxation really harmful to growth? Firm level evidence," Journal of Development Economics, Elsevier, vol. 83(1), pages 63-75, May.
    17. Stefan Sumah, 2018. "Corruption, Causes and Consequences," Chapters, in: Vito Bobek (ed.), Trade and Global Market, IntechOpen.
    18. Jiang, Ting & Nie, Huihua, 2014. "The stained China miracle: Corruption, regulation, and firm performance," Economics Letters, Elsevier, vol. 123(3), pages 366-369.
    19. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    20. Gaygysyz Ashyrov & Jaan Masso, 2020. "Does corruption affect local and foreign-owned companies differently? Evidence from the BEEPS survey," Post-Communist Economies, Taylor & Francis Journals, vol. 32(3), pages 306-329, April.
    21. Atsushi Kato & Takahiro Sato, 2014. "The effect of corruption on the manufacturing sector in India," Economics of Governance, Springer, vol. 15(2), pages 155-178, May.
    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. Lurdes Martins & Jorge Cerdeira & Aurora A.C. Teixeira, 2020. "Does corruption boost or harm firms’ performance in developing and emerging economies? A firm‐level study," The World Economy, Wiley Blackwell, vol. 43(8), pages 2119-2152, August.
    2. Demir, Firat & Hu, Chenghao & Liu, Junyi & Shen, Hewei, 2022. "Local corruption, total factor productivity and firm heterogeneity: Empirical evidence from Chinese manufacturing firms," World Development, Elsevier, vol. 151(C).
    3. Gaygysyz Ashyrov & Jaan Masso, 2020. "Does corruption affect local and foreign-owned companies differently? Evidence from the BEEPS survey," Post-Communist Economies, Taylor & Francis Journals, vol. 32(3), pages 306-329, April.
    4. Mohammad Amin & Yew Chong Soh, 2022. "Financial constraints and the impact of corruption on employment growth," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 612-635, April.
    5. Nandika Sanath Kumanayake & Ajantha Sisira Kumara & Asankha Pallegedara, 2023. "The nexus between public sector corruption and private sector efficiency: Evidence from worldwide firm‐level data," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1056-1077, May.
    6. Syed Muhammad Imran & Hafeez Ur Rehman & Rana Ejaz Ali Khan, 2020. "Effect of corruption on firm level innovation: Evidence from Pakistan," Economics and Business Letters, Oviedo University Press, vol. 9(1), pages 41-47.
    7. Tian, Ni & Zhang, Zongyi, 2018. "How do anticorruption measures affect executive incentive?," Finance Research Letters, Elsevier, vol. 24(C), pages 179-185.
    8. Wu, Tao & Delios, Andrew & Chen, Zhaowei & Wang, Xin, 2023. "Rethinking corruption in international business: An empirical review," Journal of World Business, Elsevier, vol. 58(2).
    9. Lee, Mina & Mutlu, Canan & Lee, Seung-Hyun, 2023. "Bribery and Firm Growth: Sensemaking in CEE and Post-Soviet Countries," Journal of International Management, Elsevier, vol. 29(1).
    10. Ackah, Charles G. & Görg, Holger & Hanley, Aoife & Hornok, Cecília, 2020. "Why Are Africa's Female Entrepreneurs Not Playing the Export Game? Evidence from Ghana," IZA Discussion Papers 13773, Institute of Labor Economics (IZA).
    11. Zakharov, Nikita, 2019. "Does corruption hinder investment? Evidence from Russian regions," European Journal of Political Economy, Elsevier, vol. 56(C), pages 39-61.
    12. Faris Alshubiri & Syed Ahsan Jamil & Samia Fekir, 2024. "Corruption Control, Government Effectiveness and Banking Stability: Does Corruption Grease or Sand the Wheels?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2656-2681, March.
    13. He, Wenjian & Chen, Xiaoyang & Liu, Zhiyong John, 2022. "Can anti-corruption help realize the “strong” Porter Hypothesis in China? Evidence from Chinese manufacturing enterprises," Journal of Asian Economics, Elsevier, vol. 80(C).
    14. Roberto Iorio & Maria Luigia Segnana, 2022. "Is paying bribes worthwhile? Corruption and innovation in middle-income countries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 475-504, September.
    15. Hoa T. Truong, 2020. "Corruption impacting regional economic growth: A dynamic panel data analysis for the case of Vietnam," Pacific Economic Review, Wiley Blackwell, vol. 25(5), pages 601-619, December.
    16. Nur-tegin, Kanybek & Jakee, Keith, 2020. "Does corruption grease or sand the wheels of development? New results based on disaggregated data," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 19-30.
    17. Maria Kravtsova & Aleksey Oshchepkov, 2019. "Market And Network Corruption," HSE Working papers WP BRP 209/EC/2019, National Research University Higher School of Economics.
    18. Alfredo Monte & Luca Pennacchio, 2020. "Corruption, Government Expenditure and Public Debt in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 739-771, December.
    19. Jiang, Shuguang & Wei, Qian & Zhao, Lei, 2024. "Synergizing anti-corruption strategies: Group monitoring and endogenous crackdown – An experimental investigation," China Economic Review, Elsevier, vol. 85(C).
    20. Dzhumashev, Ratbek, 2014. "Corruption and growth: The role of governance, public spending, and economic development," Economic Modelling, Elsevier, vol. 37(C), pages 202-215.

    More about this item

    Keywords

    business; regulation; corruption; efficiency; revenue;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    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:nea:journl:y:2020:i:47:p:40-65. 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: Alexey Tcharykov (email available below). General contact details of provider: https://edirc.repec.org/data/nearuea.html .

    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.