Why Do Firms Pay Bribes? Evidence on the Demand and Supply Sides of Corruption in Developing Countries
This paper empirically examines the demand and supply sides of bribery using World Bank Enterprise Survey data on 18,005 firms in 75 developing countries. It assesses the determinants of firms' bribe paying behavior and examine how bribe behav...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/615631603117229194/Why-Do-Firms-Pay-Bribes-Evidence-on-the-Demand-and-Supply-Sides-of-Corruption-in-Developing-Countries http://hdl.handle.net/10986/34649 |
| Summary: | This paper empirically examines the
demand and supply sides of bribery using World Bank
Enterprise Survey data on 18,005 firms in 75 developing
countries. It assesses the determinants of firms' bribe
paying behavior and examine how bribe behavior affects two
main sectors where corruption is rampant: taxation and
government contracts. The paper shows that corruption in tax
administration tends to be mainly a demand-side phenomenon.
Paying a bribe requested by a public official is associated
with a 16 percent increase in the share firms~^!!^ sales not
reported for tax purposes. In public procurement, the
results suggest, on the contrary, that corruption is a
supply-side phenomenon, with bribe transactions generally
initiated by firms to secure public contracts. Firms
supplying a bribe without a previous request by officials is
associated with a 17 percent increase in the bribe paid to
secure a government contract, more than three times the
effect observed on the demand side of bribery. |
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