Corruption and Firms
85 Pages Posted: 14 Mar 2017 Last revised: 28 Dec 2020
Date Written: December 25, 2020
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 in- crease in the number of firms concentrated in sectors most dependent on government relationships. 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.
Keywords: Corruption, Firms, Audits, Public Procurement, Misallocation, Labor Reallocation, Political Connections
JEL Classification: D22, D72, D73, G30, G38, H57, K00, L22, O10, O43
Suggested Citation: Suggested Citation