Ownership, Competition, and Corruption: Bribe Takers versus Bribe Payers

Over the past few years, many studies have looked the macroeconomic, cultural and institutional determinants of corruption. This study complements these existing cross-country studies by focusing on microeconomic factors that affect bribes paid in a single sector of the economy. Using enterpriselevel data on bribes paid to utilities in 21 transition economies in Eastern Europe and Central Asia, we look at how characteristics of the firms paying bribes (e.g., ownership, profitability and size) and characteristics of the utilities taking bribes (e.g., competition and utility capacity) affect the equilibrium level of corruption in the sector. On the side of bribe payers, enterprises that are more profitable, enterprises that have greater overdue payment to utilities, and de novo private firms pay higher bribes. On the side of bribe takers, bribes paid to utilities are higher in countries with greater constraints on utility capacity, lower levels of competition in the utility sector, and where utilities are state-owned. Bribes in the utility sector are also correlated with many of the macroeconomic and political factors that previous studies have found to affect the overall level of corruption.