?
How Does Corruption Affect Firm Growth in Russia? A Case Study of the Krasnoyarsk Region
This study investigates how corruption affects firm growth in the manufacturing industrial sector of Russia. Both quantitative and qualitative analyses have been done in the study. An econometric exercise on the impact of the corrupt behaviour of government officials on firm growth has been done using World Bank's Enterprise Survey data. OLS, IV, and GMM techniques have been applied to a panel dataset. The dataset suffers from some missing values which have been imputed using an econometric tool. To overcome the weakness of the quantitative analysis because of the missing values for a bribe and to have a better understanding of the issues, primary data are collected directly from the firm owners and managers from Krasnoyarsk region of Russia, and through Focus Group Discussions (FGD) with firm owners & managers and experts. The analysis of the secondary data shows a positive impact of corruption on firm growth with a highly significant coefficient of the key variable of interest, which is a bribe. The findings support the so-called speed money theory and the argument for this is that when bureaucracy is stuck in corruption, some extra informal payment would help to expedite the process. Most respondents in the primary survey and FGDs have not mentioned bribery as a barrier to growth, which means bribery helps them to speed up the firm growth.
