Assessing the Effects of Corruption and Crime on Firm Performance
36 Pages Posted: 9 Oct 2001
Date Written: March 2001
This paper uses a survey of private firms to assess the effects of corruption upon the economic prospects of firms. The paper studies whether corruption and crime affect sales, investment and employment growth at the firm level, and whether bribes and illegal payments by firms reduce bureaucratic interference. The paper finds that corruption and crime substantially reduces sales growth, and that corruption and bureaucratic interferences are positively correlated at the firm level, which casts serious doubts on various theories that postulate that corruption may increase efficiency by allowing firms to circumvent government regulations. Overall, the results of the paper suggest that corruption and crime substantially reduces firm competitiveness and that corruption is quite unlikely to have any positive effects.
Keywords: Governance competitiveness
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