The effect of market competition on bribery in emerging economies: An empirical analysis of Vietnamese firms. (July 2020)

• Record Type: Journal Article
• Authors: Malesky, Edmund J.; Nguyen, Thang V.; Bach, Thang N.; Ho, Bao D.
• Is Part Of: World development. Volume 131(2020)
• Publication Date: 2020-07
• Subjects: Bribe -- Corruption -- Social norm -- Market competition -- Policy uncertainty -- Vietnam; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2020.104957
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: We synthesize rent-seeking and norm-based explanations of firm bribery. In open markets with easy business entry, non-collusive (coercive) forms of bribery prevail. In restricted markets (due to formal or informal entry barriers), rent-seeking leads to collusive bribery. Uncertainty increases the benefits of rent-seeking in restricted environments. Hypotheses are tested on 11 years of survey data of 10, 000 businesses in 63 Vietnamese provinces. Abstract: Studies of firm bribery have not fully examined how market competition conditions the effects of social norms on firms' bribe payments. We suggest that firms pay bribes to obtain abnormal rents and/or to conform to accepted rules of corruption. These motivations operate differently, depending on the level of market competition. Using data from an annual survey of 10, 000 Vietnamese firms between 2006 and 2017, we find that in environments characterized by open competition, bribery is positively associated with long-standing norms in the business social context, while in closed-competition environments, bribe payments are functions of rents that accrue from uncertainty in policy-making.