Predictable Corruption and Firm Investment: Evidence from a Natural Experiment and Survey of Cambodian Entrepreneurs

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2008-10-26

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Abstract

This paper utilizes a unique dataset of 500 firms in ten Cambodian provinces and a natural experiment to test a long-held convention in political economy that the predictability of a corruption is at least as important for firm investment decisions as the amount of bribes a firm must pay, provided the bribes are not prohibitively expensive. Our results suggest that this hypothesis is correct. Firms exposed to a shock to their bribe schedules by a change in governor invest significantly less in subsequent periods, as they wait for new information about their new chief executive. Furthermore, the amount of corruption (both measured by survey data and proxied by the number of commercial sex workers) is significantly lower in provinces with new governors. Our findings are robust to a battery of firm-level controls and province-level investment climate measures. © 2008 E. J. Malesky and K. Samphantharak.

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10.1561/100.00008013

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Malesky, EJ, and K Samphantharak (2008). Predictable Corruption and Firm Investment: Evidence from a Natural Experiment and Survey of Cambodian Entrepreneurs. Quarterly Journal of Political Science, 3(3). pp. 227–267. 10.1561/100.00008013 Retrieved from https://hdl.handle.net/10161/17771.

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Scholars@Duke

Malesky

Edmund Malesky

Professor of Political Science

Malesky is a specialist on Southeast Asia, particularly Vietnam. Currently, Malesky's research agenda is very much at the intersection of Comparative and International Political Economy, falling into three major categories: 1) Authoritarian political institutions and their consequences; 2) The political influence of foreign direct investment and multinational corporations; and 3) Political institutions, private business development, and formalization.


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