Deals and Delays : Firm-level Evidence on Corruption and Policy Implementation Times

Deals and Delays : Firm-level Evidence on Corruption and Policy Implementation Times

This paper examines whether demands for bribes for particular government services are associated with expedited or delayed policy implementation. The "grease the wheels" hypothesis, which contends that bribes act as speed money, implies three testable predictions. First, on average, bribe requests should be negatively correlated with wait times. Second, this relationship should vary across firms, with those with the highest opportunity cost of waiting being more likely to pay and face shorter delays. Third, the role of grease should vary across countries, with benefits larger where regulatory burdens are greatest. The data are inconsistent with all three predictions. According to the preferred specifications, ceteris paribus, firms confronted with demands for bribes take approximately 1.5 times longer to get a construction permit, operating license, or electrical connection than firms that did not have to pay bribes and, respectively, 1.2 and 1.4 times longer to clear customs when exporting and importing. The results are robust to controlling for firm fixed effects and at odds with the notion that corruption enhances efficiency.

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Bibliographic Details
Main Authors: Freund, Caroline, Hallward-Driemeier, Mary, Rijkers, Bob
Language:English
en_US
Published: World Bank, Washington, DC 2014-06
Subjects:ACCESS TO FINANCE, ACCOUNTING, AUCTION, BIDDING, BRIBE, BRIBERY, BRIBES, BRIBING, BUSINESS CLIMATE, BUSINESS ENVIRONMENT, BUSINESS INDICATORS, BUSINESS REGULATION, CAPITAL INVESTMENT, CAPITAL STOCK, COMMERCE, CORRUPT, CORRUPT PRACTICES, CORRUPTION, CUSTOMS, CUSTOMS CLEARANCE, CUSTOMS CLEARANCES, DISCRIMINATION, DOMAINS, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICY, ELECTRICITY, EMPLOYMENT, EMPLOYMENT GROWTH, ENTERPRISE SURVEYS, ENTREPRENEUR, ENTREPRENEURS, ENTREPRENEURSHIP, FIRM SIZE, GENDER, GOVERNMENT CONTRACT, GOVERNMENT OFFICIALS, GOVERNMENT SERVICE, GOVERNMENT SERVICES, GROUP OF FIRMS, INSPECTIONS, INTERNATIONAL BANK, INTERNATIONAL BUSINESS, JOB CREATION, LICENSE, LICENSES, LIEN, OPEN ACCESS, PENALTY, PHONE, PHONE CONNECTION, PRIVATE INFORMATION, PRIVATE SECTOR, PRIVATE SECTOR DEVELOPMENT, PRODUCTIVITY, PUBLIC OFFICIALS, RED TAPE, REGULATORY BURDENS, REGULATORY ENVIRONMENT, REGULATORY REQUIREMENTS, RESULT, RESULTS, SALES GROWTH, SMALL FIRMS, TARGETS, TAXATION, TRANSACTION, TRANSACTION COSTS, USES, WEB,
Online Access:http://documents.worldbank.org/curated/en/2014/06/19736799/deals-delays-firm-level-evidence-corruption-policy-implementation-times
https://hdl.handle.net/10986/19375
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Summary:This paper examines whether demands for bribes for particular government services are associated with expedited or delayed policy implementation. The "grease the wheels" hypothesis, which contends that bribes act as speed money, implies three testable predictions. First, on average, bribe requests should be negatively correlated with wait times. Second, this relationship should vary across firms, with those with the highest opportunity cost of waiting being more likely to pay and face shorter delays. Third, the role of grease should vary across countries, with benefits larger where regulatory burdens are greatest. The data are inconsistent with all three predictions. According to the preferred specifications, ceteris paribus, firms confronted with demands for bribes take approximately 1.5 times longer to get a construction permit, operating license, or electrical connection than firms that did not have to pay bribes and, respectively, 1.2 and 1.4 times longer to clear customs when exporting and importing. The results are robust to controlling for firm fixed effects and at odds with the notion that corruption enhances efficiency.

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