How to Fight Corruption鈥攁nd Why We Should
Petty corruption was long thought to grease the wheels of business. But economists are learning how much it can hold back some companies and local economies.
How to Fight Corruption鈥攁nd Why We ShouldPaper Corruption and Firms: Evidence from Randomized Audits in Brazil
We estimate the causal real economic effects of a randomized anti- corruption crackdown on local governments in Brazil using rich micro-data on corruption and firms. After anti-corruption audits, municipalities experience an increase in the number of firms concentrated in sectors most dependent on government relationships. Through the estimation of geographic spillovers and additional tests, we show that audits operate via both a direct detection effect as well as through indirect deterrence channels. Politically connected firms suffer after the audits. Our estimates indicate the anti-corruption program generates significant local multipliers which are consistent with the presence of a large corruption tax on government-dependent firms.
- Authored by
- 2017
- Political Economy
Read the Research in Chicago Booth Review