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Corruption and firm behavior

Author

Listed:
  • Sequeira, Sandra
  • Djankov, Simeon

Abstract

This paper investigates how corruption affects firrm behavior. Firms can engage in two types of corruption when seeking a public service: cost-reducing "collusive" corruption and cost increasing "coercive" corruption. Using an original and unusually rich dataset on bribe payments at ports matched to firrm-level data, we observe how firms respond to each type of corruption by adjusting their shipping and sourcing strategies. "Collusive" corruption is associated with higher usage of the corrupt port, while "coercive" corruption is associated with reduced demand for port services. Our results suggest that firms respond to the opportunities and challenges created by different types of corruption, organizing production in a way that increases or decreases demand for the public service. Understanding how firms respond to corruption has important implications for how we conceptualize, identify and measure the overall impact of corruption on economic activity.

Suggested Citation

  • Sequeira, Sandra & Djankov, Simeon, 2013. "Corruption and firm behavior," LSE Research Online Documents on Economics 54321, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:54321
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    File URL: http://eprints.lse.ac.uk/54321/
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    Cited by:

    1. Krishnendu Ghosh DASTIDAR & YANO Makoto, 2017. "In many emerging economies corruption, poor quality of information and poor governance lead to restricted entry. In this paper we analyze the determinants of the .height.of entry barrier in a developi," Discussion papers 17010, Research Institute of Economy, Trade and Industry (RIETI).
    2. Dmitry Ryvkin & Danila Serra & James Tremewan, 2015. "I paid a bribe: Information Sharing and Extortionary Corruption," Working Papers wp2015_07_01, Department of Economics, Florida State University.
    3. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini, 2020. "Making small firms happy? The heterogeneous effect of trade facilitation measures," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 565-598, August.
    4. Cyril Chalendard & Gaël Raballand & Antsa Rakotoarisoa, 2019. "The use of detailed statistical data in customs reforms: The case of Madagascar," Development Policy Review, Overseas Development Institute, vol. 37(4), pages 546-563, July.
    5. Michael Mbate, 2018. "Who bears the burden of bribery? Evidence from public service delivery in Kenya," Development Policy Review, Overseas Development Institute, vol. 36(S1), pages 321-340, March.
    6. Sandra Sequeira, 2016. "Corruption, Trade Costs, and Gains from Tariff Liberalization: Evidence from Southern Africa," American Economic Review, American Economic Association, vol. 106(10), pages 3029-3063, October.
    7. Charles Angelucci & Antonio Russo, 2015. "Petty corruption and citizen feedback," Working Papers 2015/25, Institut d'Economia de Barcelona (IEB).
    8. Athanasouli, Daphne & Goujard, Antoine, 2015. "Corruption and management practices: Firm level evidence," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1014-1034.
    9. Suárez-Alemán, Ancor & Morales Sarriera, Javier & Serebrisky, Tomás & Trujillo, Lourdes, 2016. "When it comes to container port efficiency, are all developing regions equal?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 86(C), pages 56-77.
    10. Agarwal,Sumit & Morais,Bernardo & Ruiz Ortega,Claudia & Zhang,Jian, 2016. "The political economy of bank lending : evidence from an emerging market," Policy Research Working Paper Series 7577, The World Bank.
    11. Dmitry Ryvkin & Danila Serra, 2019. "Is More Competition Always Better? An Experimental Study Of Extortionary Corruption," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 50-72, January.
    12. Krishnendu Ghosh Dastidar & Makoto Yano, 2021. "Corruption, market quality, and entry deterrence in emerging economies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 101-117, March.
    13. Gneezy, Uri & Saccardo, Silvia & van Veldhuizen, Roel, 2016. "Bribery: Greed versus reciprocity," Discussion Papers, Research Unit: Market Behavior SP II 2016-203, WZB Berlin Social Science Center.
    14. Temesgen Worku & Juan P. Mendoza & Jacco L. Wielhouwer, 2016. "Tariff evasion in sub-Saharan Africa: the influence of corruption in importing and exporting countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 741-761, August.
    15. AfDB AfDB, . "East Africa Quarterly Bulletin - Second Quarter 2013," Country Brochure, African Development Bank, number 973.
    16. Charles Angelucci & Antonio Russo, 2015. "Petty Corruption and Citizen Reports," CESifo Working Paper Series 5528, CESifo.
    17. Ryvkin, Dmitry & Serra, Danila & Tremewan, James, 2017. "I paid a bribe: An experiment on information sharing and extortionary corruption," European Economic Review, Elsevier, vol. 94(C), pages 1-22.

    More about this item

    Keywords

    corruption; firm behaviour; transport; ports; trade costs;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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