Challenges for sustainable productivity in developing economies: shortage of energy and corruption

Developing countries suffer from shortages of electricity, posing a severe problem for industrial firms and giving them considerable incentives to access electricity resources through bribery. We investigate how firms' revenues, sales and productivity are affected by payments of bribes to obtain electricity connections. We use ordinary least squares (OLS), quantile and instrumental variable (IV) quantile regression analysis. OLS estimates reveal a negative effect on sales and productivity and a positive impact on profitability, while quantile regression suggests a negative effect on sales across all quantiles and a positive effect on productivity at the lower quantile. Since this research shows that bribery may negatively influence productivity, it informs shareholders that bribery may be detrimental to their long-term benefits.