How Bribery Distorts Firm Growth : Differences by Firm Attributes

How corruption affects economic performance has been studied for over a decade. Yet the lack of detailed firm-level data has limited research regarding who is carrying the real burden of corruption. This study shows that for firms in the Latin America and Caribbean region, bribery significantly distorts firm growth. Firms that pay bribes when conducting business transactions -- such as applying for permits, electricity, or water connections -- have 24 percent lower annual sales growth than firms that do not face such solicitations. Moreover, these distortions are more severe for low-revenue-generating and young firms. Using the instrumental variables method, the authors show that these results are robust to different specifications and the use of different sub-samples.