Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence

Virginie Vial and Julien Hanoteau

World Development, 2010, vol. 38, issue 5, 693-705

Abstract: Summary Using panel data from the Indonesian manufacturing industry during the Suharto era (1975-95), we assess the impact of plant-level corruption on output and productivity growth. In support of the "grease the wheels" hypothesis and the view of an Asian paradox, we find that corruption, measured as bribes and indirect tax payments, has a positive and statistically significant effect on individual plant growth. This effect persists over the entire period, which suggests improvements in the efficacy of the bribe system and a strengthening of the long-term contract between firms and the government.

Keywords: corruption; taxation; plant; growth; and; productivity; Asia; Indonesia (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (105)

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