Why Do Firms Hide? Bribes and Unofficial Activity after Communism

Posted: 4 Oct 2001

See all articles by Simon Johnson

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

Daniel Kaufmann

Natural Resource Governance Institute (NRGI); The Brookings Institution

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Christopher M. Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

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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

Suggested Citation

Johnson, Simon and Kaufmann, Daniel and McMillan, John and Woodruff, Christopher, Why Do Firms Hide? Bribes and Unofficial Activity after Communism. Journal of Public Economics, Vol. 76, No, 3 Pp. 495?520 . Available at SSRN: https://ssrn.com/abstract=259018

Simon Johnson (Contact Author)

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center ( email )

United States
617-253-8412 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daniel Kaufmann

Natural Resource Governance Institute (NRGI) ( email )

80 Broad Street
New York, NY 10004
United States

HOME PAGE: http://www.resourcegovernance.org

The Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States

HOME PAGE: http://www.brookings.edu/experts/kaufmannd

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christopher Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States
858-534-0590 (Phone)
858-534-3939 (Fax)

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