Bribery, Plant Size and Size Dependent Distortions
This paper studies the relationship between distortions, plant size, and bribery possibilities. In a distorted economy, bribery is a transfer from a private party to government officials to ‘get things done’. Enterprise Surveys data shows that smal...
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| Language: | English English |
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World Bank, Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099939208312222334/IDU0ddc2ab7d06ea204cdf098b10f6cb0748af44 http://hdl.handle.net/10986/37963 |
| Summary: | This paper studies the relationship
between distortions, plant size, and bribery possibilities.
In a distorted economy, bribery is a transfer from a private
party to government officials to ‘get things done’.
Enterprise Surveys data shows that small plants spend a
higher fraction of their output on bribery than big plants.
In this paper, a one-sector growth model is developed in
which size-dependent distortions, bribery opportunities, and
different plant sizes coexist. In the model, bribery is
endogenous in the sense that managers decide to use it as a
way to deal with distortions. Two sets of exercises are
conducted to quantify the interplay of size-dependent
distortions and bribery. First, the model parameters are
calibrated to generate the plant size distribution of the
U.S., by assuming the U.S. is free of distortions. Then,
size-dependent distortions are introduced to the undistorted
economy, and their effects with and without bribery
opportunities are compared. Counterfactual exercises show
that size-dependent distortions become less distortionary in
the presence of bribery opportunities since plants are able
to avoid distortions by paying larger bribes. Second, the
model is calibrated with distortions and bribery
opportunities using Turkish data. The choice of this country
for analysis does not imply that bribery or size-dependent
distortions are particularly large in Türkiye relative to
countries of comparable development. The choice is driven by
the availability of data on both the plant size distribution
and spending on bribery in the country. The results indicate
that the inferred level of distortions is sizable for all
plants. The removal of distortions, which would eliminate
the incentive for paying bribes, can have a substantial
effect on both the output and the mean plant size which
could increase by 63.6 and 82.5 percent, respectively. |
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