Determinants of Bribe in Informal Sector: Some Empirical Evidence from India

Payment of bribes, eviction and confiscation of goods are critical issues faced by the street vendors in Indian cities. In this context, this study attempts to empirically outline the determinants of bribe payment in this sector by drawing upon traditional literature on corruption. We conduct a primary survey in an industrial town in India. To empirically analyse the bribery models for the informal enterprises, we utilize several alternative specifications for a robustness check purpose. We also test a range of important factors that may cause bribery. Our analysis has offered some important results. First, we find that street vendors with higher business size are more likely to pay bribe and also likely to pay higher amount of bribe. Second, it is found that business-specific laws and regulations reduce the bargaining power of the street vendor. Vendors dealing in more regulated businesses like eateries, tobacco products are more likely to pay bribe. Third, it is found that vendors originating from distant places are likely to pay more bribe, and thus, the study support the proposition that corruption may create inequality, from which some groups can be more disadvantageous than others. Finally, contrary to the findings of traditional literature, the study finds that in the specific context, business age is positively related with bribe payment.