Does it pay to be corrupt? This column presents evidence from 22 emerging economies in Europe and the former Soviet Union on the effects of corruption on firm productivity. It finds that in a highly corrupt country, bribing officials actually has a negative effect on productivity, whereas in countries with strong institutions, it can open doors that competitors dare not touch.
In April, two former Siemens executives received suspended sentences for their part in the biggest bribery scandal in German history. Between 2000 and 2006, €1.3 billion was dished out to foreign officials in exchange for the German conglomerate securing lucrative contracts. In case we needed reminding, corruption is not just isolated to backward countries and banana republics – it happens everywhere.
There are several studies dealing with the causes and effects of corruption. Yet most of these studies focus on the questions at the country level such as why countries have higher rates of corruption than others and what this means for aggregate growth (e.g. Svensson 2005).
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