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Title: Firm Growth and Corruption: Empirical Evidence from Vietnam
Authors: Bai, Jie
Jayachandran, Seema
Malesky, Edmund J.
Olken, Benjamin A.
Keywords: Vietnam
Issue Date: 29-Dec-2015
Series/Report no.: ;pp. 1 - 66
Abstract: This paper tests whether firm growth reduces corruption, using cross-industry variation in growth rates in Vietnam and survey data from over 13,000 Vietnamese firms between 2006 and 2010. We employ two instrumental variables strategies, one based on growth in a firm's industry in other provinces within Vietnam and a second based on industry growth in neighboring China. In both specifications, we find that firm growth causes a decrease in bribe extraction by government o cials. We then model one mechanism that could generate such an effect; in our model, government officials' choice of how much bribe money to extract from rms is modulated by inter-jurisdictional competition. A key secondary prediction of the model is that the negative effect of growth on bribery is larger if firms are more mobile. We find empirical support for this prediction: Effects are larger for firms whose property rights to their land are transferable and who have operations in multiple provinces.
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