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Why Do Firms Hide? Bribes and Unofficial Activity after CommunismSimon JohnsonMassachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER) Daniel KaufmannThe Brookings Institution John McMillanStanford Graduate School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Christopher M. WoodruffUniversity of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) Journal of Public Economics, Vol. 76, No, 3 Pp. 495?520 Abstract: Our survey of private manufacturing firms finds the size of hidden 'unofficial' activity to be much larger in Russia and Ukraine than in Poland, Slovakia and Romania. A comparison of cross-country averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three Eastern European countries find that bureaucratic corruption is significantly associated with hiding output.
Keywords: Corruption, taxation, legal system, unofficial economy JEL Classification: H26, K42, O17 Accepted Paper SeriesDate posted: October 4, 2001Suggested CitationContact Information
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