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Does Greater Regulatory Burden Lead to More Corruption? Evidence Using Firm-Level Survey Data for Developing Countries

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  • Mohammad Amin
  • Yew Chong Soh

Abstract

It is sometimes thought that regulation often creates opportunities for public officials to extract bribes. If this is true, deregulation offers a simple way of combating corruption. However, empirical evidence on the corruption and regulation nexus is limited. Further, the corruption indices used are based on experts’ opinions, which may suffer from perception bias. The present paper attempts to address these shortcomings using firm-level survey data for 131 mostly developing countries on the actual experience of the firms with bribery and regulatory burden. The study examines the level of overall corruption and petty corruption. Exploiting variation in regulatory burden, both within-country and industry-level, a large positive effect of regulatory burden on corruption is found. For the baseline results, the bribery rate is higher by about 0.03 percentage points for each percentage point increase in the regulatory burden. The finding is robust to several controls and endogeneity checks.

Suggested Citation

  • Mohammad Amin & Yew Chong Soh, 2021. "Does Greater Regulatory Burden Lead to More Corruption? Evidence Using Firm-Level Survey Data for Developing Countries," The World Bank Economic Review, World Bank, vol. 35(3), pages 812-828.
    • Handle: RePEc:oup:wbecrv:v:35:y:2021:i:3:p:812-828.
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    File URL: http://hdl.handle.net/10.1093/wber/lhaa007
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    Citations

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    Cited by:

    1. Usman Khalid & Mohammad Amin, 2023. "The impact of ethnic fractionalisation on labor productivity: Does firm size matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(7), pages 2213-2249, October.
    2. Brancati, Emanuele & Di Maio, Michele & Rahman, Aminur, 2024. "Finance, informal competition, and expectations: A firm-level analysis," World Development, Elsevier, vol. 173(C).
    3. Mohammad Amin, 2023. "Does competition from informal firms hurt job creation by formal manufacturing SMEs in developing and emerging countries? Evidence using firm-level survey data," Small Business Economics, Springer, vol. 60(4), pages 1659-1681, April.

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