Bribe-Switching

99 Pages Posted: 4 Apr 2022

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Desiree Desierto

affiliation not provided to SSRN

Abstract

The Foreign Corrupt Practices Act (FCPA) prohibits US firms from paying bribes to foreign public officials. We show that FCPA enforcement has no positive effect on the GDP per capita of the countries of these officials but, rather, increases their countries shadow economy. When public officials take bribes both from legal and illegal markets, corruption enforcement in legal markets induces them to make up for lost rents by taking more bribes from illegal markets. In equilibrium, they enforce less against illegal producers, thereby increasing the size of illegal markets.  We find that one case of FCPA enforcement alone increases the shadow economy by as much as 0.25 percentage points (pp), homicide rates by 0.02 pp, and trade misinvoicing by 0.5 pp.

Keywords: corruption, bribery, shadow economy, illegal markets

Suggested Citation

Bologna Pavlik, Jamie and Desierto, Desiree, Bribe-Switching. Available at SSRN: https://ssrn.com/abstract=4074383 or http://dx.doi.org/10.2139/ssrn.4074383

Jamie Bologna Pavlik (Contact Author)

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

Desiree Desierto

affiliation not provided to SSRN ( email )

No Address Available

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