Determinants underlying incidence and amount of bribery: An evidence from manufacturing firms in Vietnam

Abstract

Using a panel data set from the Small and Medium Enterprise (SME) Surveys from 2005 - 2013, this study investigates the factors which influence the incidence of bribery and the size of bribe payment among formal and informal firms in Vietnam. Due to censored nature of the data on bribes and sample selection bias, this paper applies Heckman two - step procedure which was proposed by Heckman (1979) to correct these problems. This study finds strong evidence that the propensity to bribe as well as the variation in the amount of bribe is highly positively correlated with the interaction level with public officials, the firm‟s ability to pay and the burden of regulation that firms face. In this paper, the interaction with public officials is looked at different types of interaction. Besides, this study also points out that company without official business registration licenses are more likely to avoid paying the informal costs. These results are robust when the lagged values of profit are used as instruments for profit.