Monopoly Money: Foreign Investment and Bribery in Vietnam, a Survey Experiment

59 Pages Posted: 3 Dec 2011 Last revised: 30 Sep 2013

See all articles by Edmund J. Malesky

Edmund J. Malesky

Duke University, Political Science

Dimitar D. Gueorguiev

Syracuse University - Department of Political Science

Nathan M. Jensen

Washington University in St. Louis - Department of Political Science

Date Written: September 30, 2013

Abstract

Prevailing work argues that foreign investment reduces corruption, either by competing down monopoly rents or diffusing best practices of corporate governance. We argue that this theory is too broad-brush and that the empirical work testing it is too heavily drawn from aggregations of total foreign investment entering an economy. Alternatively, we suggest that openness to foreign investment has differential effects on corruption even within the same country and under the same domestic institutions over time. Rather than interpreting bribes solely as a coercive “tax” imposed on business, we argue that foreign firms use bribes to enter protected sectors in search of rents. Thus, we expect variation in bribe propensity across sectors according to expected profitability. We test this effect using a list experiment embedded in three waves of a nationally representative survey of 27,000 foreign and domestic businesses in Vietnam, finding that the effect of economic openness on the probability to engage in bribes is conditional on polices that restrict investment.

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

Malesky, Edmund J. and Gueorguiev, Dimitar D. and Jensen, Nathan M., Monopoly Money: Foreign Investment and Bribery in Vietnam, a Survey Experiment (September 30, 2013). Available at SSRN: https://ssrn.com/abstract=1967670 or http://dx.doi.org/10.2139/ssrn.1967670

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

Dimitar D. Gueorguiev

Syracuse University - Department of Political Science ( email )

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

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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