Bribes

A recent article by Rand and Tarp (Economic Development and Cultural Change, April, 2012 -- draft here) provides some data on the reasons why firms pay bribes in Vietnam:

From left to right in the graph above, the reasons are:

1. To get connected to public services.
2. To get licenses and permits.
3. To deal with tax and tax collectors.
4. To gain government contracts.
5. To deal with customs.
6. Other reasons.

The paper concludes:

. . . [T]he firm growth increase after obtaining a business registration license on average outweigh the additional bribe cost of becoming formal; and our analysis shows that this positive registration effect is not driven by self-selection of well-performing firms into formality . . .

Bribes slow down growth and hampers (but does not prevent) formalization. Overall, anti-corruption measures not only contribute to increasing formalization of the economy, but also have the potential of yielding a double dividend on firm performance through direct profit effects.