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

47 Pages Posted: 1 Aug 2011 Last revised: 29 Nov 2011

Dimitar D. Gueorguiev

Syracuse University

Edmund J. Malesky

Duke University, Political Science

Nathan M. Jensen

Washington University in St. Louis - Department of Political Science

Date Written: 2011

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.

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

Suggested Citation

Gueorguiev, Dimitar D. 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: https://ssrn.com/abstract=1899731

Dimitar D. Gueorguiev

Syracuse University ( email )

100 Eggers Hall
Syracuse, NY 13244
United States
3154430309 (Phone)

Edmund J. Malesky (Contact Author)

Duke University, Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

Nathan M. Jensen

Washington University in St. Louis - Department of Political Science ( email )

219 Eliot Hall
St. Louis, MO 63130
United States

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