LAUSR

Abstract This paper uses multi-country, firm-level data covering 109 countries for the period 2005 to 2017, to examine the effects of bribery on export decisions for firms facing institutional constraints. Bribery consists of “greasing” and rent-seeking behavior. Firms’ self-evaluations of the extent of obstacles affecting their business operations, including corruption, political instability, tax administration, and business license regulations, were used to capture the institutional constraints. Our empirical results provide evidence to support the “greasing-the-wheels-of-trade” hypothesis. The positive effect of greasing bribery is particularly sizable for large-sized firms or those facing no institutional constraints. In other words, firms with strong bargaining power proxied by firm size obtain more benefits from paying bribes if there are no institutional constraints; thus, they are more likely to export. These results hold when we specify almost all types of institutional constraints except for political instability. Lastly, when the endogeneity problem is controlled, the effect of greasing bribery becomes pronounced.