Kaufmann, Daniel and Wei, Shang-Jin (1999): Does 'Grease Money' Speed Up the Wheels of Commerce? Published in:
Download (66kB) | Preview
In an environment in which bureaucratic burden and delay are exogenous, an individual firm may find bribes helpful to reduce the effective red tape it faces. The “efficient grease” hypothesis asserts therefore that corruption can improve economic efficiency and that fighting bribery would be counter-productive. This need not be the case. In a general equilibrium in which regulatory burden and delay can be endogenously chosen by rentseeking bureaucrats, the effective (not just nominal) red tape and bribery may be positively correlated across firms.
Using data from three worldwide firm-level surveys, we examine the relationship between bribe payment, management time wasted with bureaucrats, and cost of capital. Contrary to the “efficient grease” theory, we find that firms that pay more bribes are also likely to spend more, not less, management time with bureaucrats negotiating regulations, and face higher, not lower, cost of capital.
|Item Type:||MPRA Paper|
|Original Title:||Does 'Grease Money' Speed Up the Wheels of Commerce?|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development|
|Depositing User:||Laisa Daza|
|Date Deposited:||10. Apr 2008 20:15|
|Last Modified:||12. Feb 2013 12:51|
Ades, Alberto, and Rafael Di Tella. 1997. “National Champions and Corruption: Some Unpleasant Interventionist Arithmetic.” The Economic Journal 107 (July, 443): 1023-42.
Andvig, Jens Christopher. 1991. “The Economics of Corruption: A Survey.” Studi Economici. 43: 57-94.
Banerjee, Abhijit. 1997. “A Theory of Misgovernance.” Department of Economics Working Paper 97/04 February, pp. 62. Massachusetts Institute of Technology, Cambridge, Massachusetts.
Bliss, Christopher, and Rafael Di Tella. 1997. “Does Competition Kill Corruption?” Journal of Political Economy 5(December,105): 1001-1023.
Bardhan, Pranab. 1997. “Corruption and Development: A Review of Issues.” Journal of Economic Literature Vol. XXXV (September): 1320-1346.
Eliott, Kimberly Ann. 1997. “Corruption and the Global Economy.” Institute for International Economics, Washington DC.
Hines, James Jr. 1995. “Forbidden Payment: Foreign Bribery and American Business After 1977.” NBER Working Paper 5266. September.
Huntington, Samuel P. 1968. Political Order in Changing Societies. New Haven: Yale University Press.
Kaufmann, Daniel. 1997a. “The Missing Pillar of a Growth Strategy for Ukraine: Institutional and Policy Reform for Private Sector Development.” In Peter K. Cornelius and Patrick Lenain. eds., Ukraine: Accelerating the Transition to Market. Washington: International Monetary Fund. pp 234-275.
Kaufmann, Daniel. 1997b. “Corruption: Some Myths and Facts.” An early version was published in Foreign Policy (Summer 1997):114-131.
Klitgaard, Robert. 1990. Tropical Gangsters. BasicBooks.
Krueger, Anne O. 1974. “The Political Economy of Rent-seeking Society.” American Economic Review 64(June,3): 291-303.
Leff, Nathaniel H. 1964. “Economic Development Through Bureaucratic Corruption.” The American Behavior Scientist 8(November, 2): 8-14.
Lui, Francis. 1985. “An Equilibrium Queuing Model of Bribery.” Journal of Political Economy 93(August, 4): 760-781.
Mauro, Paolo. 1995. “Corruption and Growth.” Quarterly Journal of Economics 110: 681-712.
Myrdal, Gunnar. 1968. Asian Drama: An Inquiry into the Poverty of Nations. New York: Pantheon Books.
Rose-Ackerman, Susan. 1975. “The Economics of Corruption.” Journal of Public Economics June, 5617.
Rose-Ackerman, Susan. 1978. Corruption: A Study in Political Economy. New York: Academic Press.
Rose-Ackerman, Susan. 1998. “Corruption and Development.” In Boris Pleskovic and Joseph Stiglitz. eds.. Annual World Bank Conference on Development Economics-1997. Washington, D.C.: The World Bank.
Shleifer, Andrei, and Robert W. Vishny.1993. “Corruption.” Quarterly Journal of Economics 108: 599-617.
Shleifer, Andrei, and Robert W. Vishny. 1994. “Politicians and Firms.” Quarterly Journal of Economics (November).
Tanzi, Vito. 1998. “Corruption Around the World: Causes, Consequences, Scope and Cures.” International Monetary Fund Staff Papers 45(December): 559-94.
Wei, Shang-Jin. 1997a. “How Taxing is Corruption on International Investors?” The National Bureau of Economic Research Working Paper 6030. May. Forthcoming in Review of Economics and Statistics.
Wei, Shang-Jin. 1997b. “Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills.” The National Bureau of Economic Research Working Paper. November.