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Firm Growth and Corruption: Empirical Evidence from Vietnam

Jie Bai, Seema Jayachandran, Edmund J Malesky and Benjamin A Olken

Economic Journal, 2019, vol. 129, issue 618, 651-677

Abstract: This article tests whether firm growth reduces corruption, using data from over 10,000 Vietnamese firms. We employ instrumental variables based on growth in a firm's industry in other provinces within Vietnam and in China. We find that firm growth reduces bribes as a share of revenues. We propose a mechanism for this effect whereby government officials' decisions about bribes are modulated by inter-jurisdictional competition. This mechanism also implies that growth reduces bribery more for more mobile firms; consistent with this prediction, we find a larger effect for firms with transferable rights to their land or operations in multiple provinces.

Date: 2019
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