Does 'Grease Money' Speed Up the Wheels of Commerce?

IMF Working Papers, March 1, 2000

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Does 'Grease Money' Speed Up the Wheels of Commerce?

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Bibliographic details

• Authors: Daniel Kaufmann, Shang-Jin Wei
• Published: March 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451848557.001

Overview

• Authors: Daniel Kaufmann, Shang-Jin Wei
• Date: March 1, 2000
• Series: IMF Working Papers
• Central question: Whether bribe-extracting bureaucrats who can endogenously choose regulatory burden and delay create a positive correlation between effective red tape and bribery across firms.

Hypothesis and theoretical framework

• In a general equilibrium where bureaucrats can endogenously choose regulatory burden and delay, effective (not just nominal) red tape and bribery can be positively correlated across firms.
• The model implies that firms paying more in bribes may still face greater regulatory time costs if bureaucrats respond by imposing greater effective regulatory burden and delay.

Empirical strategy and data

• Data source: three worldwide firm surveys (described generically as "three worldwide firm surveys" in the paper).
• Empirical test: relationship between firms’ bribery payments and measures of time spent with bureaucrats, regulatory negotiations, and cost of capital.

Key findings

• Firms that pay more in bribes are also likely to spend more, not less, management time with bureaucrats in negotiating regulations.
• Firms that pay more in bribes face a higher, not lower, cost of capital.
• Evidence from the three worldwide firm surveys is consistent with the paper’s theoretical hypothesis linking bribery and effective regulatory burden.

Subject areas and keywords

• Subject: Corruption, Crime, Economic sectors, Foreign corporations, Revenue administration, Tax assessments
• Keywords: bribery firm, firm, firms face., WP

Publication metadata (from the content)

• Pages: 21
• Volume: 2000
• Issue: 064
• Series: Working Paper No. 2000/064
• Stock No: WPIEA0642000
• DOI: https://doi.org/10.5089/9781451848557.001
• ISBN: 9781451848557
• ISSN: 1018-5941

IMF Working Paper by Daniel Kaufmann and Shang-Jin Wei, "Does 'Grease Money' Speed Up the Wheels of Commerce?", March 1, 2000.

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• "Does 'Grease Money' Speed Up the Wheels of Commerce?" - WP/00/64
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