HKS Authors

See citation below for complete author information.

Assistant Professor of Public Policy

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.

Citation

Bai, Jie, Seema Jayachandran, Edmund J. Malesky, and Benjamin A. Olken. "Firm Growth and Corruption: Empirical Evidence from Vietnam." The Economic Journal (Fall 2017).