Greasing the wheels? The effect of corruption in regulated manufacturing sectors of India

Abstract

We investigate whether corruption "greases the wheels" of bureaucracies and enhances economic performance. Specifically, we examine the interaction effect of corruption and regulation on the economic performance of manufacturing industries in India. Our estimation results show that the combination of corruption and regulation has significant positive effects on gross value added per worker, total factor productivity, and capital labor ratio. This indicates the existence of a "greasing the wheels" effect.

The impact of petty corruption on firm innovation in Vietnam

“…in a 'second best world', aka the so-called 'greasing the wheels hypothesis' (see, for example, [13], [14] Huntington, 1968 [15]). Empirical evidence of positive impact of corruption at the country level can be found in Méon and Weill [16] and at state level for India could be found in Kato and Sato [17] where corruption 'greases the wheels' of productivity or growth.…”

Corruption and political stability: Does the youth bulge matter?

“…There is variation across regions: the lowest percentage of such experience is reported for the Organisation for Economic Co-operation and Development (OECD) firms (8%) and the highest for Sub-Saharan African firms (27%). 2 This stream of literature suggests that corruption assists firms in addressing widespread inefficiency in public governance and the provision of public goods (see Vial andHanoteau, 2010 andKato andSato, 2015).…”

Türki̇ye’de Yolsuzluğun Doğrudan Yabanci Yatirimlar Üzeri̇ndeki̇ Olasi Etki̇leri̇ Üzeri̇ne Bi̇r Araştirma

“…Dreher and Gassebner (2013: 427) suggest that corruption facilitates firm entry in highly regulated economies and at the maximum level of regulation, corruption can indeed be beneficial. Kato and Sato (2014) also propose that bribery may facilitate investments in India. However, this interaction disappears once the manufacturing sector is deregulated.…”