Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms

Abstract

This paper uses a unique data set on corruption containing quantitative information on bribe payments of Ugandan firms. The data have two striking features: not all firms report that they need to pay bribes, and there is considerable variation in reported graft across firms facing similar institutions/policies. We propose an explanation for these patterns, based on differences in control rights and bargaining strength across firms. Consistent with the control rights/ bargaining hypotheses, we find that the incidence of corruption can be explained by the variation in policies/regulations across industries. How much must bribepaying firms pay? Combining the quantitative data on corruption with detailed financial information from the surveyed firms, we show that firms' "ability to pay" and firms' "refusal power" can explain a large part of the variation in bribes across graft-reporting firms. These results suggest that public officials act as price (bribe) discriminators, and that prices of public services are partly determined in order to extract bribes. Downloaded from16. Due to the lack of valid instruments, we cannot also instrument for the capital stock and the alternative return. Estimating a reduced-form version of Regression 4, excluding k and ␣k , gives results (for profit) similar to those reported above. a. The dependent variable is in the left column with the number of observations in brackets. b. Coefficient estimates from OLS regressions are in the second and third columns on missing variable dummy taking the value 1 if corruption data are missing and 0 otherwise, with standard errors in parentheses, and p-values in brackets.

Engaging in corruption: The influence of cultural values and contagion effects at the microlevel

“…To date, only a limited number of studies have started to investigate the determinants of corruption at the individual level (e.g., Swamy et al, 2001;Svensson, 2003;Torgler and Valev, 2006;Dong and Torgler, 2009;Dong et al 2012;Guerrero and Rodríguez-Oreggia, 2008;Mocan, 2008;Torgler and Valev 2010). Mocan (2008), for example, finds that highly educated and high-income individuals have higher exposure to being asked for a bribe by a government official, that males are more frequent targets of bribery, and that living in larger cities increases the risk of exposure to bribery.…”

Regulation and corporate corruption: New evidence from the telecom sector

“…This is an important point because the weak sector performance that results from this type of corporate corruption not only limits access to telephony and hinders utility reforms, but also constrains private business growth and development (Estache, Goicoechea, and Trujillo, 2009). Second, our study contributes to the literature on the micro-based incentive study on firm corrupt behavior in emerging countries (Svensson, 2003;Clarke and Xu, 2004;Cai, Fang and Xu, forthcoming). Third, we provide an quantitative study that complements the regulation literature examining the impacts of regulatory schemes on firm operations.…”

“…For example, a regulator may have efficient control on service providers by controlling demand for bribes from customers; however, meanwhile service providers could use bribes to build up political ties in order to secure their profits despite the presence of a strict regulatory agency. In the former case, more regulation control is correlated with less corruption at the regulated firm level, but in the 2 See, for example, Treisman (2000), Svensson, (2003), Clarke and Xu (2004), Aidt, Dutta, and Sena (2006), Beck, Demirguc-Kunt and Levine (2006), Fan, Lin, and Treisman (2009), Barth, Lin, Lin, and Song (2009) and Anbarci, Escaleras, and Register (2009). In addition, Dreher, Kotsogiannis, and McCorriston (2006) employ a structural model by treating corruption as a latent variable to derive an index of corruption.…”

Context, law and reinvestment decisions: Why the transitional periphery differs from other post-state socialist economies

“…Over time, organisations have the opportunity to build networks and relationships with institutions (Hoskisson, Eden, Lau, & Wright, 2000) thereby reducing the negative impacts of corruption on transactions costs (Makhija, 2003;Makhija & Stewart, 2002). Age can confer specific advantage in terms of the institutional embeddedness of the organisation leading to a reduction in perceptions of institutional uncertainty resulting from corruption, or the opportunity to manipulate the environment to match its needs (Zimmerman & Zeitz, 2002), so, for example, older firms may have developed greater bargaining power leading to public officials demanding fewer bribes (Svensson, 2003). At the most basic level, those older firms actively participating in corruption know who to pay and, how much.…”

“…Larger firms have greater resources available to them than smaller firms and therefore are better able to pay bribes (Svensson, 2003). Increased size also provides advantages such as enhanced contacts, 'clout' and the ability to make credible threats of retaliation to host governments should property rights be violated (Acs, Morck, Shaver, & Yeung, 1997).…”