TY - UNPB

T1 - Aid, Growth, and Development

T2 - Have We Come Full Circle?

AU - Arndt, Channing

AU - Jones, Edward Samuel

AU - Tarp, Finn

N1 - JEL classification: O1, O4, F35, C21

PY - 2010

Y1 - 2010

N2 - This paper uses a unique panel dataset on firm-level corruption. It contains quantitative information on bribe payments by a sample of formal and informal Vietnamese firms. We show that bribe incidence is highly associated with firm-level differences in (i) visibility, (ii) sunk costs, (iii) ability to pay, and (iv) level of interaction with public officials. Moreover, when informal firms become formal the probability of paying bribes increases. Becoming formal is also associated with a revenue growth premium that is not driven by self-selection of well-performing firms. On average, this premium outweighs the additional bribe cost of formalization. Formalization embodies net benefits in spite of the growth hampering effects of bribes.

AB - This paper uses a unique panel dataset on firm-level corruption. It contains quantitative information on bribe payments by a sample of formal and informal Vietnamese firms. We show that bribe incidence is highly associated with firm-level differences in (i) visibility, (ii) sunk costs, (iii) ability to pay, and (iv) level of interaction with public officials. Moreover, when informal firms become formal the probability of paying bribes increases. Becoming formal is also associated with a revenue growth premium that is not driven by self-selection of well-performing firms. On average, this premium outweighs the additional bribe cost of formalization. Formalization embodies net benefits in spite of the growth hampering effects of bribes.

KW - Faculty of Social Sciences

KW - firm performance

KW - corruption

KW - Vietnam

M3 - Working paper

BT - Aid, Growth, and Development

PB - UNU-WIDER

CY - Helsinki

ER -