Non-random selection into entrepreneurship in the realm of government decentralization and corruption

Sanchari Choudhury

European Journal of Political Economy, 2023, vol. 78, issue C

Abstract: For the past few decades, the extant literature on corruption has primarily relied on firm-level survey measures – for example, those from the World Bank – to explore the relevant empirical determinants of this illegal practice. However, these studies have potentially overlooked an underlying econometric problem – namely, non-random selection into entrepreneurship – that may bias all the estimated determinants to date if ignored in the analysis. Here, I assess this possibility by applying the traditional Heckman (1979) correction procedure in a novel way: using two different samples. I use my proposed solution in the context of government decentralization and firm-level corruption as a plausible application. Specifically, I revisit the question of the causal impact of government decentralization on firm-level corruption when the underlying sample selection issue is addressed. Results are worth noting. I find reasonable evidence of selection bias. On controlling for this, fiscal decentralization substantially decreases firm-level bribery, in general. This finding is in contradiction to the results reported by naive estimation strategies where the sample selection issue is completely ignored.

Keywords: Corruption; Decentralization; Nascent entrepreneurship; Sample Selection (search for similar items in EconPapers)
JEL-codes: C34 D73 H10 M13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:78:y:2023:i:c:s0176268023000216

DOI: 10.1016/j.ejpoleco.2023.102377

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