Corruption and Firms

Abstract We estimate the causal real economic effects of a randomized anti-corruption crackdown on local governments in Brazil using rich micro-data on corruption and firms. After anti-corruption audits, municipalities experience an increase in the number of firms concentrated in sectors most depend...

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Bibliographic Details
Published in:The Review of economic studies 2022-03, Vol.89 (2), p.695-732
Main Authors: Colonnelli, Emanuele, Prem, Mounu
Format: Article
Language:English
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Summary:Abstract We estimate the causal real economic effects of a randomized anti-corruption crackdown on local governments in Brazil using rich micro-data on corruption and firms. After anti-corruption audits, municipalities experience an increase in the number of firms concentrated in sectors most dependent on government relationships and public procurement. Through the estimation of geographic spillovers and additional tests, we show that audits operate via both a direct detection effect as well as through indirect deterrence channels. Politically connected firms suffer after the audits. Our estimates indicate the anti-corruption program generates significant local multipliers which are consistent with the presence of a large corruption tax on government-dependent firms.
ISSN:0034-6527
1467-937X
DOI:10.1093/restud/rdab040