Corruption and entrepreneurship: evidence from Brazilian municipalities

Jamie Bologna, Amanda Ross

Research output: Contribution to journalArticle

29 Scopus citations

Abstract

We estimate the effect of corruption on business activity in Brazilian municipalities. We employ a new measure of corruption based on data from random audits of municipal governments. Our results suggest that higher levels of corruption are generally associated with reductions in the number of business establishments. Furthermore, we find that these effects become larger over time, suggesting that corruption is particularly detrimental over the long-run. However, we also find that the effect of corruption on business activity can be insignificant or even positive conditional on institutional quality being very poor. This is consistent with the “grease the wheels” hypothesis, which argues that corruption provides entrepreneurs with means to avoid burdensome regulations and taxes.

Original languageEnglish
Pages (from-to)59-77
Number of pages19
JournalPublic Choice
Volume165
Issue number1-2
DOIs
StatePublished - Oct 1 2015

Keywords

  • Corruption
  • Entrepreneurship
  • Institutions

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