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Day-to-day policing represents a fundamental interface between citizens and states. Yet even in the most capable states, local policing varies enormously from one community to the next. The authors seek to understand this variation and in doing so make three contributions: First, they conceptualize communities and individuals as networks more or less capable of demanding high-quality policing. Second, they present original survey data and semistructured interviews on local policing from over one hundred sixty slums, eight thousand households, and one hundred seventy informal neighborhood leaders in India that contribute to the nascent empirical work on comparative policing and order. Third, they find evidence that well-connected individuals and densely connected neighborhoods express greater confidence in and satisfaction with local policing. Critically, these differences do not appear to be a function of a lower propensity for local conflict but rather of an increased capacity to leverage neighborhood leaders to mediate relations with the police. The combination of analytics and empirics in this article provides insight into the conditions under which individuals and communities experience the police as expropriators of rents or neutral providers of order.

No generally accepted framework exists for constructing and evaluating measures of corruption. This article shows how the axiomatic approach of the poverty and inequality literature can be applied to the measurement of corruption. A conceptual framework for organizing corruption data is developed, and three aggregate corruption measures consistent with axiomatic requirements are proposed. The article also provides guidelines for empirical applications of corruption measures and discusses data requirements. A brief empirical example illustrates how each of the measures captures a distinct view of corruption that yields a different ranking. To the authors' knowledge, this article provides the first analysis of corruption measurement using an axiomatic framework.

Research summary: Using a unique database that measures firm-level bribery in Africa and Latin America, we corroborate extant results in the literature that paying bribes deters firm investments in fixed assets. Our contribution is to explore four mechanisms. By adopting a reverse causality approach (Gelman and Imbens, 2013), we find evidence consistent with one of them: short-term oriented firms prefer to bribe rather than invest in fixed assets, while the opposite is true for firms with a long-term orientation. We rule out that bribe payments drain financial resources for investment, that firms that invest do not bribe because fixed assets make them less flexible and more vulnerable to future bribes, and that less efficient firms bribe rather than invest. Managerial summary: We ask whether, along with ethical issues, bribing affects the behavior and performance of firms in Africa and Latin America. Our statistical analysis shows that bribe payments do not reduce the short-term performance of firms, but frustrate investments in fixed assets, which is the foundation of firms' long-term growth. It is like seeking a job via nepotism or education. Nepotism makes it likely to find a job in the short term. However, the solid skills generated by education raise the odds of finding better jobs in the future. We rule out some common explanations for the trade-off between bribing and investment (e.g., bribes drain resources to invest or that less efficient firms bribe and do not invest). Our analysis suggests that firms with short-term orientations are more likely to bribe and firms with long-term orientation are more likely to invest.

Prior literature on the role that firm heterogeneity plays in corruption finds that larger firms pay smaller bribes and are less likely to pay bribes than smaller firms. These studies, however, often overlook the plausible reverse causality between firm growth or firm size and corruption. Utilizing an innovative identification strategy that accounts for this source of endogeneity, this study finds that increased firm size actually causes greater corruption and bureaucratic burdens on a typical firm and provides evidence against the argument for a uniform corruption burden regardless of size. It was determined that a one standard deviation increase in sales leads to 0.33 standard deviation increase in bribes, and to 0.36 standard deviation increase in management time spent dealing with public officials. Moreover, although corruption burden increases with increasing firm size, we find that this relationship is non-linear and diminishes in magnitude as firm size approaches to medium and large. We conclude with implications and policy considerations.

This paper provides analyses of the effect of corruption in South Asia on (1) credit access for small- and medium-size enterprises (SMEs), and (2) credit constraints faced by female-owned and male-owned SMEs. By addressing potential endogeneity and reverse causality of corruption and credit constraints via instrumental variables, this study reports that corruption has a detrimental effect on credit access. Specifically, corruption increases the probability of SMEs credit constraints by 7.63%. However, gender differences emerge, indicating that bribery is slightly more effective when used by female SME owners. When male-owned SMEs pay bribes, they are on average 0.61% more credit-constrained than their counterparts. For femaleowned SMEs paying bribes, they are on average 0.78% more likely to be less credit-constrained compared to female SME owners who do not pay bribes. Overall, bribery is not very effective in achieving the desired outcome and attitudes towards bribery as unethical may be more a question of culture than of gender.

This paper exploits quasi-experimental variation in tariffs in southern Africa to estimate trade elasticities. Traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate. Trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities. In contexts of pervasive corruption, even small bribes can significantly reduce tariffs, making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms ' import behavior. The tariff liberalization scheme is, however, still associated with improved incentives to accurately report quantities of imported goods, and with a significant reduction in bribe transfers from importers to public officials.

This study examines the impact of bribery within the home country on firm exports by developing two contrasting hypotheses. On the one hand, preferential treatment resulting from government officials in exchange for bribes may promote exports by enhancing efficiency and enabling bribing firms to better compete in foreign markets. On the other hand, preferential treatment resulting from bribes may decrease exports by providing firms with more established positions within the domestic market diminishing the incentive to explore foreign markets. Adopting the three-stage least squares method, we test these competing arguments using a sample of firms operating within transition economies. We find that bribery within the home country decreases rather than increases firm exports. The implications of our findings are discussed.

Recent years have seen a remarkable expansion in economists' ability to measure corruption. This in turn has led to a new generation of well-identified, microeconomic studies. We review the evidence on corruption in developing countries in light of these recent advances, focusing on three questions: how much corruption is there, what are the efficiency consequences of corruption, and what determines the level of corruption? We find robust evidence that corruption responds to standard economic incentive theory but also that the effects of anticorruption policies often attenuate as officials find alternate strategies to pursue rents.

This study investigates the effects of paying bribes on access to credit for small and medium enterprises (SMEs). Bribery is variously portrayed, in the literature, as greasing the wheel (helping) or sand in the wheel (impeding) applications for credit. Studies supporting both perspectives leave the issue unresolved, encouraging further analysis, using reliable data and robust analytic methods. An examination of The World Bank Enterprise Surveys of SME data for India, using an instrumental variable probit model, provides a more definitive answer. SME bribery is detrimental to accessing credit and more so for firms that have been in business for many years and operating on a small scale. Involvement of supply and demand side forces increases the need for multiple control variables. From a supply side perspective, high corruption increases difficulties for financial institutions to control borrower risk and recover loans. Accordingly, financial institutions reduce their lending to SMEs, which mostly belong to a high-risk category. Unlike large firms, SMEs paying bribes to grease the wheel are drawn to the informal sector, avoiding attention from officials. Where SMEs pay bribes in the formal sector, it is noticed and likely to increase the probability that other parties will also demand payments. The demand side argument regards bribes as tax, increasing loan costs to SMEs. Consequently, making significant bribes decreases SMEs’ profitability. Less profitable SMEs may not obtain access to credit. From a policy perspective, anti-corruption measures, in emerging and low-income economies, are vital for developing SMEs and stimulating significant welfare gains.

In 2016, the Brazilian construction firm Odebrecht was fined 2.6 billion USD by the US Department of Justice. It was the largest corruption case ever prosecuted under the US Foreign Corrupt Practices Act. Our examination of judicial documents and media reports on this case provides new insights on the workings of corruption in the infrastructure sector. Odebrecht paid bribes for two reasons: to tailor the terms of the auction in its favor, as well as to obtain favorable terms in contract renegotiations. In projects where Odebrecht paid bribes, costs increased by 70.8 percent on average, compared with 5.6 percent for projects with no bribes. We also find that bribes and profits made from bribing were smaller than documented in most previous studies, in the range of one to two percent of the cost of a project.