Culture and bribe giving: Evidence from firm-level data

Bribery is prevalent in many countries and may be affected by the national culture. This study aims to examine the relationship between culture and firm bribery. This study thus combines country-level data from Hofstede’s cultural dimensions and firm-level data from the Enterprise Surveys, resulting in a combined data set covering more than 40,000 firms in 45 countries. Using a probit model with a dummy dependent variable indicating firm bribery, this study finds that firm bribery is associated with two cultural dimensions. Specifically, a country’s level of power distance is positively associated with firm bribery, while the level of long-term orientation is negatively associated with it. The effects of these cultural dimensions are not only statistically significant, but also economically important.     

The effect of corruption on entrepreneurship in the presence of weak regulatory quality: Evidence from developing countries

Efforts to improve currently low entrepreneurship in developing countries could be necessary but likely hampered by the high corruption. With poor regulatory quality in most developing countries, the effect of corruption on entrepreneurship could be unique. By using the Generalized Method of Moments (GMM) estimator, utilizing 48 developing countries as the sample for the period from 2008 to 2016, this study finds that there is a conditional effect of corruption on entrepreneurship, implying that poor regulatory quality has forced and opened up the door for individuals to offer bribes in order to start a new business. Nonetheless, as corruption could add to the high cost of business start-ups, to enhance entrepreneurship, policymakers need to give priority to improving regulatory quality and, subsequently, force corruption to fade away.     

Non-random selection into entrepreneurship in the realm of government decentralization and corruption

For the past few decades, the extant literature on corruption has primarily relied on firm-level survey measures – for example, those from the World Bank – to explore the relevant empirical determinants of this illegal practice. However, these studies have potentially overlooked an underlying econometric problem – namely, non-random selection into entrepreneurship – that may bias all the estimated determinants to date if ignored in the analysis. Here, I assess this possibility by applying the traditional Heckman (1979) correction procedure in a novel way: using two different samples. I use my proposed solution in the context of government decentralization and firm-level corruption as a plausible application. Specifically, I revisit the question of the causal impact of government decentralization on firm-level corruption when the underlying sample selection issue is addressed. Results are worth noting. I find reasonable evidence of selection bias. On controlling for this, fiscal decentralization substantially decreases firm-level bribery, in general. This finding is in contradiction to the results reported by naive estimation strategies where the sample selection issue is completely ignored.