WHY DO FIRMS PAY BRIBES? FIRM-LEVEL EVIDENCE FROM THE CAMBODIAN GARMENT INDUSTRY

This paper investigates the causes and effects of bribe payments using data from garment-producing firms in Cambodia. We uncover the reasons why firms pay bribes and describe what they receive in return. We test the hypothesis that bribe payments reduce bureaucratic delays and find that bribery can improve productivity by reducing bureaucratic delays. The evidence suggests that, if the government improves administrative services, firms can reduce unofficial payments because unavoidable bureaucratic delays compel them to pay bribes. Our evidence also suggests that foreign ownership can explain why firms are not harassed heavily in this industry. Copyright (c) 2011 John Wiley & Sons, Ltd.