Forthcoming in Journal of Public Economics Privatization, Competition, and Corruption: How Characteristics of Bribe Takers and Payers Affect Bribes To Utilities

Many recent studies have looked at the macroeconomic, cultural and institutional determinants of corruption at the cross-national level. Using enterprise-level data on bribes paid to utilities in 21 transition economies in Eastern Europe and Central Asia, we examine how characteristics of the utilities taking bribes and the firms paying bribes affect the equilibrium level of corruption in the sector. Bribe takers (utility employees) are more likely to take bribes in countries with greater constraints on utility capacity, lower levels of competition in the utility sector, and where utilities are state-owned. Bribe payers (enterprises) are more likely to pay bribes when they are more profitable, have greater overdue payment to utilities, and are de novo private firms. Our study has several advantages over most existing studies. First, it uses an objective measure of corruption, rather than a subjective measure. Second, the large firm-level sample, which includes firms from multiple countries, allows us to examine both firm-level and national factors that might affect corruption. Finally, we are able to examine the behavior of both bribe takers and bribe payers.