Firm Growth and Corruption: Empirical Evidence from Vietnam

This paper tests whether firm growth reduces corruption, using data
from over 13,000 Vietnamese firms. We employ instrumental variables
based on growth in a firm’s industry in other provinces within Vietnam
and in China. We find firm growth causes a decrease in bribes. We then
model a mechanism whereby government officials’ decisions about bribes
are modulated by inter-jurisdictional competition. The model predicts a
larger negative eect of growth on bribery when firms are more mobile.
Consistent with this prediction, effects are larger for firms whose property
rights to their land are transferable and who have operations in multiple
provinces.