Essays on Corruption
Abstract
The focus of the research is to study the causes and consequences of corruption. It uses survey data and empirical methods to study: First, the firm characteristics that affect their perception of average bribery and second, the impact of their perception of bribery on their investment decision.
The first chapter examines the characteristics of the firms that affect their perception of corruption. In particular, it tests whether firms financial performance and dependence on government services are associated with their perception of the size of bribery. The results indicate that firm ability to pay, measured by firm sales, can significantly explain the variation in the firms’ perception of bribery. Also, it finds that dependence on government is an important predictor of the firms that believes that an average firm in their business should pay bribes. The result is robust across a broad set of model specifications.
The second chapter studies the effect of corruption on firm investment. It aims to explore how does the perception of average bribery affect the investment decisions of the firms. It reviews the previous research on the topic and highlights the lack of attention to the nonresponse to the questions related to corruption. It then analyzes its implications for the underlying analysis and suggests that the previous studies are likely to be biased and overestimate the magnitude of the net effect of corruption on investment.