Are corruption and taxation really harmful to growth? Firm level evidence
Coauthor(s): Jakob Svensson.
Exploiting a unique data set containing information on the estimated bribe payments of Ugandan firms, we study the relationship between bribery payments, taxes and firm growth. Using industry-location averages to circumvent potential problems of endogeneity and measurement errors, we find that both the rate of taxation and bribery are negatively correlated with firm growth. A one-percentage point increase in the bribery rate is associated with a reduction in firm growth of three percentage points, an effect that is about three times greater than that of taxation. This provides some validation for firm-level theories of corruption which posit that corruption retards the development process to an even greater extent than taxation.
Source: Journal of Development Economics
Fisman, Raymond, and Jakob Svensson. "Are corruption and taxation really harmful to growth? Firm level evidence." Journal of Development Economics 83 (2006): 63-75.