Working Paper: NBER ID: w29627
Authors: Emanuele Colonnelli; Spyridon Lagaras; Jacopo Ponticelli; Mounu Prem; Margarita Tsoutsoura
Abstract: We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption cases. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.
Keywords: No keywords provided
JEL Codes: D73; G30; H57; O10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exposure to corruption (H57) | firm size increase (L25) |
| exposure to corruption (H57) | decrease in procurement contracts (H57) |
| decrease in procurement contracts (H57) | firm growth adaptation (L25) |
| corruption involvement type (D73) | firm growth outcomes (L25) |
| victims of corruption (H57) | firm growth (L26) |
| actively involved but delivering quality services (L84) | firm growth (L26) |
| clearly corrupt firms (D73) | firm size decrease (L25) |