Corruption and Firms

Emanuele Colonnelli and Mounu Prem

Working papers from Red Investigadores de Economía

Abstract: We estimate the causal real economic effects of a randomized anticorruption crackdown on local governments in Brazil over the period 2003-2014. After anti-corruption audits, municipalities experience an increase in economic activity concentrated in sectors most dependent on government relationships. These effects spill over to nearby municipalities and are larger when the audits are covered by the media. Back-of-the-envelope estimates suggest that $1 away from corruption generates more than $3 in local value added. Using administrative matched employer-employee and firm-level datasets and novel face-to-face firm surveys we argue that corruption mostly acts as a barrier to entry, and by introducing costs and distortions on local government-dependent firms. The political misallocation of resources across firms plays a seemingly secondary role, indicating that at the local level most rents are captured by politicians and public officials rather than firms.

Keywords: Corruption; Firms; Audits; Public Procurement; Misallocation; Labor Reallocation; Political Connections (search for similar items in EconPapers)
JEL-codes: D22 D73 H83 (search for similar items in EconPapers)
Pages: 57
Date: 2019-10
New Economics Papers: this item is included in nep-acc, nep-dev, nep-law and nep-pol
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Corruption and Firms (2022)
Working Paper: Corruption and Firms (2020)
Working Paper: Corruption and Firms (2020)
Working Paper: Corruption and firms (2019)
Working Paper: Corruption and Firms (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:rie:riecdt:18

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