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Financial constraints and the impact of corruption on employment growth

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  • Mohammad Amin
  • Yew Chong Soh

Abstract

Corruption can impose a significant financial burden on firms. Such burden is magnified when firms are financially constrained. The paper applies this idea to the impact of corruption on employment growth. Using firm‐level survey data for 85 countries, we find that corruption hurts more when firms are financially constrained than when they are not. Baseline estimate suggests that a one percentage point increase in overall corruption lowers growth rate of employment by 0.45 percentage points for financially constrained firms but only by 0.08 percentage points for financially unconstrained firms. The result passes several robustness checks.

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  • 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.
    • Handle: RePEc:wly:jintdv:v:34:y:2022:i:3:p:612-635
    DOI: 10.1002/jid.3608
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    1. Islam, Asif M. & Amin, Mohammad, 2023. "The gender labor productivity gap across informal firms," World Development, Elsevier, vol. 167(C).
    2. Pragati Priya & Chandan Sharma, 2023. "Do financial constraints and corruption limit firms' innovation capability? Evidence from developing economies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1935-1961, June.
    3. Priya, Pragati & Sharma, Chandan, 2023. "Reinforcing the effects of corruption and financial constraints on firm performance: Normal versus crisis period in developing economies," Economic Modelling, Elsevier, vol. 127(C).

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