Financial constraints and the impact of corruption on employment growth. (15th December 2021)

• Record Type: Journal Article
• Authors: Amin, Mohammad; Soh, Yew Chong
• Is Part Of: Journal of international development. Volume 34:Number 3(2022)
• Page Start: 612
• Page End: 635
• Publication Date: 2021-12-15
• Subjects: access to finance -- corruption -- employment growth -- firm level; Economic development projects -- Developing countries -- Periodicals; Developing countries -- Economic policy -- Periodicals; Developing countries -- Foreign economic relations -- Periodicals; Economic development -- Periodicals; 330.91724
• DOI: 10.1002/jid.3608
• Languages: English
• ISSNs: 0954-1748

Abstract

Abstract: Corruption can impose a significant financial burden on firms. Such burden is magnified when firms are financially constrained. The paper applies this idea to the impact of corruption on employment growth. Using firm‐level survey data for 85 countries, we find that corruption hurts more when firms are financially constrained than when they are not. Baseline estimate suggests that a one percentage point increase in overall corruption lowers growth rate of employment by 0.45 percentage points for financially constrained firms but only by 0.08 percentage points for financially unconstrained firms. The result passes several robustness checks.