Corruption and Firm Growth: Evidence from Around the World

Abstract

We empirically investigate the relationship between corruption and growth using a firm-level data set that is unique in scale, covering almost 88,000 firms across 141 economies in 2006-2020, with wideranging corruption experiences. The scale and detail of our data allow us to explore the corruption-growth relationship at a very local level, within industries in a relatively narrow geography. We report three empirical regularities. First, firms that make zero informal payments tend to grow slower than bribers. Second, this result is driven by non-bribers in high-corruption countries. Third, among bribers growth is decreasing in the amount of informal payments -- in both high- and low-corruption countries. We suggest that this set of results may be reconciled with a simple model in which endogenously determined higher bribe rates lead to lower growth, while non-bribers are often excluded entirely from growth opportunities in high-corruption settings.

Keywords: corruption, firm growth, enterprise surveys

JEL Classification: D22, O12