Global Poverty Research Group

Corruption and firm performance in Africa

The research question

In this part of the programme, measures of the quantitative importance of corruption are being investigated.  Survey data are used to investigate empirically the importance of corruption in determining firm performance in Africa. We allow for the possibility of perception bias on the part of the respondents and for corruption being endogenous. We find that corruption is linked to significant adverse effects on firm performance in two ways. At the firm (or ‘local’) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economy-wide (or ‘global’) level, firms in countries with pervasive corruption are some 70 per cent less efficient than firms in countries free of corruption. We thus provide evidence that competitive uncoordinated local corruption has substantial global effects.

Recent publications

McArthur, J. and F. Teal, ‘Corruption and firm performance in Africa’, CSAE working paper WPS/2002.10, 2002.

Reseachers to contact for this project

Francis Teal