Political Regimes and Firms' Decisions to Pay Bribes: Theory and Evidence from Firm-level Surveys

Shuichiro Nishioka, Sumi Sharma and Tuan Le
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Shuichiro Nishioka: West Virginia University
Sumi Sharma: Independent researcher

No 23-04, Working Papers from Department of Economics, West Virginia University

Abstract: This paper makes the most of the observed actions of bribe takers and givers from the World Bank Enterprise Surveys and studies how a taker’s action influences a giver's decision to pay bribes. To motivate our empirical study, we consider Kaufmann and Wei's (1999) Stackelberg game between a tax authority and a firm that undergoes tax inspection. The model predicts that, when the authority can use its action as a credible threat for the firm's profitability, the authority disturbs the firm by inspecting more, and the firm is more likely to pay bribes. Consistent with the theoretical prediction, we find correlational evidence that the propensity to pay bribes increases with the number of inspection visits, particularly for non-democratic countries.

Keywords: Corruption; Autocracy; Policy implementation times; World Bank Enterprise Surveys (search for similar items in EconPapers)
JEL-codes: H22 H32 O25 O43 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2023-04
New Economics Papers: this item is included in nep-dev, nep-pbe and nep-pol
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