Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154383
Authors: 
Gamberoni, Elisa
Gartner, Christine
Giordano, Claire
Lopez-Garcia, Paloma
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1950
Abstract: 
We investigate the role of corruption in the business environment in explaining the efficiency of within-sector production factor allocation across firms in nine Central and Eastern European countries in the period 2003-2012. Using a conditional convergence model, we find evidence of a positive relationship between corruption growth and both labour and capital misallocation dynamics, once country framework conditions are controlled for: the link between corruption and input misallocation dynamics is larger the smaller the country, the lower the degree of political stability and of civil liberties, and the weaker the quality of its regulations. As input misallocation is one of the determinants of productivity growth, we further show that the relationship between changes in corruption and TFP growth is indeed negative. Our results hold when we tackle a possible omitted variable bias by instrumenting corruption with two instrumental variables (the percentage of women in Parliament and freedom of the press).
Subjects: 
bribes
capital misallocation
labour misallocation
total factor productivity
JEL: 
D24
D73
O47
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2198-5
Document Type: 
Working Paper

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