Corruption and Market Competition: Evidence from Post-Communist Countries

This paper empirically examines whether market competition is associated with greater bribe payments. We use firm-level data from the Business Environment and Enterprise Performance Surveys. Since market competition could be endogenous and some firms report zero bribes, we employ a tobit estimation methodology instrumenting for market competition. We find that greater market competition increases the amount of bribes paid. Results are robust across several measures of market competition. However, market competition is less strongly associated with bribes in the presence of other obstacles of doing business that could also lead to more bribes.