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Deals and delays : firm-level evidence on corruption and policy implementation times, Volume 1
 
Author:Freund, Caroline; Hallward-Driemeier, Mary; Rijkers, Bob; Country:World;
Date Stored:2014/06/27Document Date:2014/06/01
Document Type:Policy Research Working PaperSubTopics:Public Sector Corruption & Anticorruption Measures; Access to Finance; Microfinance; Crime and Society; E-Business
Language:EnglishRegion:The World Region
Report Number:WPS6949Collection Title:Policy Research working paper ; no. WPS 6949Paper is funded by the Knowledge for Change Program (KCP)
Volume No:1  

Summary: This paper examines whether demands for bribes for particular government services are associated with expedited or delayed policy implementation. The "grease the wheels" hypothesis, which contends that bribes act as speed money, implies three testable predictions. First, on average, bribe requests should be negatively correlated with wait times. Second, this relationship should vary across firms, with those with the highest opportunity cost of waiting being more likely to pay and face shorter delays. Third, the role of grease should vary across countries, with benefits larger where regulatory burdens are greatest. The data are inconsistent with all three predictions. According to the preferred specifications, ceteris paribus, firms confronted with demands for bribes take approximately 1.5 times longer to get a construction permit, operating license, or electrical connection than firms that did not have to pay bribes and, respectively, 1.2 and 1.4 times longer to clear customs when exporting and importing. The results are robust to controlling for firm fixed effects and at odds with the notion that corruption enhances efficiency.

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