Foreign investment and bribery: A firm-level analysis of corruption in Vietnam

Dimitar Gueorguiev, Edmund Malesky

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

Among the concerns faced by countries pondering the costs and benefits of greater economic openness to international capital flows is the worry that new and powerful external actors will exert a corrupting influence on the domestic economy. In this paper, we use a novel empirical strategy, drawn from research in experimental psychology, to test the linkage between foreign direct investment (FDI) and corruption. The prevailing literature has produced confused and contradictory results on this vital relationship due to errors in their measurement of corruption which are correlated with FDI inflows. When a less biased operationalization is employed, we find clear evidence of corruption during both registration and procurement procedures in Vietnam. The prevalence of corruption, however, is not associated with inflows of FDI. On the contrary, one measure of economic openness appears to be the most important driver of reductions in Vietnamese corruption: the wave of domestic legislation, which accompanied the country's bilateral trade liberalization agreement with the United States (US-BTA), significantly reduced bribery during business registration.

Original languageEnglish (US)
Pages (from-to)111-129
Number of pages19
JournalJournal of Asian Economics
Volume23
Issue number2
DOIs
StatePublished - Apr 1 2012
Externally publishedYes

Keywords

  • Bribery
  • Corruption
  • FDI
  • List question
  • Unmatched count technique
  • Vietnam

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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