Firm Growth and Corruption: Empirical Evidence from Vietnam

Bai, Jie; Jayachandran, Seema; Malesky, Edmund; Olken, Benjamin (2017)


Bai, Jie, Seema Jayachandran, Edmund Malesky, and Benjamin Olken. 2017. “Firm Growth And Corruption: Empirical Evidence From Vietnam”. The Economic Journal, 1-27.
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.