DP16060 Corruption and Firm Growth: Evidence from around the World

Author(s): Raymond Fisman, Sergei Guriev, Carolin Ioramashvili, Alex Plekhanov
Publication Date: April 2021
Keyword(s): Corruption, enterprise surveys, Firm Growth
JEL(s): D22, O12
Programme Areas: Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16060

We empirically investigate the relationship between corruption and growth using a firm-level data set that is unique in scale, covering almost 88,000 firms across 141 economies in 2006-2020, with wide-ranging corruption experiences. The scale and detail of our data allow us to explore the corruption-growth relationship at a very local level, within industries in a relatively narrow geography. We report three empirical regularities. First, firms that make zero informal payments tend to grow slower than bribers. Second, this result is driven by non-bribers in high-corruption countries. Third, among bribers growth is decreasing in the amount of informal payments --- in both high- and low-corruption countries. We suggest that this set of results may be reconciled with a simple model in which endogenously determined higher bribe rates lead to lower growth, while non-bribers are often excluded entirely from growth opportunities in high-corruption settings.