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http://ssrn.com/abstract=1563538
 
 

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Who Bribes in Public Contracting and Why: Worldwide Evidence from Firms


Anna E. D'Souza


U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Daniel Kaufmann


The Brookings Institution

May 2011


Abstract:     
Abstract: We utilize survey data from over 11,000 firms operating in 125 countries and a profit-maximizing cost-benefit framework to study the determinants of procurement bribery. About one-third of firms bribe to secure public contracts, with an average bribe of 7.9% of the contract value. Econometric estimations suggest that the demand-side of good governance (voice and democratic accountability, press freedom, transparency) and the supply-side (rule of law, government effectiveness), along with competition, significantly reduce the incidence and magnitude of bribery by firms. Multinational firms appear sensitive to reputational risks in their home countries, but also partially adapt to their host country environment, with 20% bribing in middle- and low-income countries, but only 11% bribing in OECD countries; in contrast, 36% of domestic firms bribe. Larger and foreign-owned firms are less likely to bribe than smaller domestic ones, yet among bribers, foreign and domestic firms pay similar amounts. This suggests that reputational risks – affecting the decision to bribe, not the amount – are important. The results point to potential policy measures that raise the costs and lower the benefits of bribing, e.g., public disclosure of firms that bribe, and cast doubt on conventional initiatives that may not affect profits, e.g., voluntary codes of conduct.

Number of Pages in PDF File: 44

Keywords: governance, corruption, bribery, public contracting, public procurement

JEL Classification: K42, L1, H11, P48

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Date posted: March 29, 2010 ; Last revised: December 6, 2011

Suggested Citation

D'Souza, Anna E. and Kaufmann, Daniel, Who Bribes in Public Contracting and Why: Worldwide Evidence from Firms (May 2011). Available at SSRN: http://ssrn.com/abstract=1563538 or http://dx.doi.org/10.2139/ssrn.1563538

Contact Information

Anna E. D'Souza (Contact Author)
U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )
355 E Street, SW
Washington, DC 20024-3221
United States
Daniel Kaufmann
The Brookings Institution ( email )
1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6257 (Phone)
HOME PAGE: http://www.thekaufmannpost.net
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