Bribery? We Call It The Cost of Business: An Examination of the Effect of Bribery and Corruption on Investment Decisions in Eastern European Countries Público

Abstract

Abstract
Bribery? We Call It The Cost of Business:
An Examination of the Effect of Bribery and Corruption on Investment Decisions in Eastern
European Countries
Bribery in Eastern Europe has been an endemic problem since the fall of Communism. After an
era plagued by nepotism, bribery, underhanded deals, unofficial payments, and corrupted
officials, Eastern Europe has yet to fully recover from the rampant corruption that permeated
through all ranks of the communist regimes. With much of Eastern Europe falling behind in most
measures of economic development, standard of living, foreign investment, and general
prosperity, there has been much speculation that its delayed growth is due in large part to its
corrupt business practices. By using data from the Word Bank's Business Environment and
Enterprise Performance Surveys, this study is focused on measuring the affect bribery has on
investment decisions at the firm level in 28 Eastern European countries. Breaking down bribery
into country-industry averages and then controlling for various explanatory variables, we are
able to prove that there is a significant negative relationship and that an increase in bribery will
cause a decrease in investment.

Table of Contents

Table of Contents
CONTENTS
I. Introduction
II. Background and Relevance
III. Theoretical Basis and Literature
Review
IV. Data and Methodology
IV.1 The Business Environment and
Enterprise Performance Survey

(BEEPS)
IV.2 Investment and Bribery
IV.3 Explanatory Variables
V. Empirical Estimation
V.1 Investment Decisions without
Country-Industry Averages
V.2 Investment Decisions with
Country-Industry Averages
V.2.a Additional Controls for
Country and Industry
VI. Additional Robustness Checks
VI.1 Methodology
VI.2 Checking the validity of the
Country-Industry Averages
VI.3 Controlling for Obstacles to
Business
VII. Concluding Remarks
VIII. Appendices

About this Honors Thesis

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School	Emory College
Department	Economics
Degree	BA
Submission	Honors Thesis
Language	English
Research Field	Economics, General Economics, Commerce-Business
Palabra Clave	Bribery Eastern Europe Corruption Investment
Committee Chair / Thesis Advisor	Arbatskaya, Maria, Emory University
Committee Members	Ninkovic, Jasminka, Emory University Galle, Jeffery, Emory University

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