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Corruption and Firms

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  • Emanuele Colonnelli
  • Mounu Prem

Abstract

We estimate the causal real economic effects of a randomized anti-corruption crackdown on local governments in Brazil using rich micro-data on corruption and firms. After anti-corruption audits, municipalities experience an increase in the number of firms concentrated in sectors most dependent on government relationships and public procurement. Through the estimation of geographic spillovers and additional tests, we show that audits operate via both a direct detection effect as well as through indirect deterrence channels. Politically connected firms suffer after the audits. Our estimates indicate the anti-corruption program generates significant local multipliers which are consistent with the presence of a large corruption tax on government-dependent firms.

Suggested Citation

  • Emanuele Colonnelli & Mounu Prem, 2022. "Corruption and Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(2), pages 695-732.
    • Handle: RePEc:oup:restud:v:89:y:2022:i:2:p:695-732.
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    File URL: http://hdl.handle.net/10.1093/restud/rdab040
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    References listed on IDEAS

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    1. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    2. Arvind K. Jain, 2001. "Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
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    More about this item

    Keywords

    Corruption; Firms; Brazil; Audits; Public procurement; Political connections; Misallocation; Development;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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