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Rent(s) Asunder: Sectoral Rent Extraction Possibilities and Bribery by Multi-National Corporations


Dimitar Gueorguiev


University of California, San Diego - Department of Political Science

Edmund J. Malesky


Duke University, Political Science

Nathan M. Jensen


Washington University in Saint Louis - Department of Political Science

2011

APSA 2011 Annual Meeting Paper

Abstract:     
We argue that openness to foreign investment can have differential effects on corruption, even within the same country and under the exact same domestic institutions over time. Our theoretical approach departs from standard political economy by attributing corruption motives to firms as well as officials. Rather than interpreting bribes solely as a coercive “tax” imposed on business activities, we allow for the possibility that firms may be complicit in using bribes to enter protected sectors. Thus, we expect variation in bribe propensity across sectors according to expected profitability which we proxy with investment restrictions. Specifically, we argue that foreign investment will not be associated with corruption in sectors with fewer restrictions and more competition, but will increase dramatically as firms seek to enter restricted and uncompetitive sectors that offer higher rents. We test this effect using a list experiment, a technique drawn from applied psychology, embedded in a nationally representative survey of 10,000 foreign and domestic businesses in Vietnam. Our findings show that the impact of domestic reforms and economic openness on corruption is conditional on polices that restrict competition by limiting entry into the sector.

Number of Pages in PDF File: 47

Keywords: Corruption, Bribery, Rents, Foreign Direct Investment, Multi-National Corporations, World Trade Organization, Restrictions, List Question, FDI, MNC, UCT, WTO

JEL Classification: F23, K42, L51, O1

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Date posted: August 1, 2011 ; Last revised: November 29, 2011

Suggested Citation

Gueorguiev, Dimitar and Malesky, Edmund J. and Jensen, Nathan M., Rent(s) Asunder: Sectoral Rent Extraction Possibilities and Bribery by Multi-National Corporations (2011). APSA 2011 Annual Meeting Paper. Available at SSRN: http://ssrn.com/abstract=1899731

Contact Information

Dimitar Gueorguiev
University of California, San Diego - Department of Political Science ( email )
9500 Gilman Drive
Code 0521
La Jolla, CA 92093-0521
United States
2144176014 (Phone)
Edmund J. Malesky (Contact Author)
Duke University, Political Science ( email )
Durham, NC 27708-0204
United States
Nathan M. Jensen
Washington University in Saint Louis - Department of Political Science ( email )
219 Eliot Hall
St. Louis, MO 63130
United States
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