TY  - JOUR
AU  - Kaufmann,Daniel
AU  - Wei,Shang-Jin
TI  - Does "Grease Money" Speed Up the Wheels of Commerce?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7093
PY  - 1999
Y2  - April 1999
UR  - http://www.nber.org/papers/w7093
L1  - http://www.nber.org/papers/w7093.pdf
N1  - Author contact info:
Daniel Kaufmann
E-Mail: daniel.kaufmann@snb.ch

Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - In an environment in which bureaucratic burden and delay are exogenous, an individual firm may find bribes helpful to reduce the effective red tape it faces.  The  efficient grease' hypothesis asserts therefore that corruption can improve economic efficiency and that fighting bribery would be counter-productive. This need not be the case.  In a general equilibrium in which regulatory burden and delay can be endogenously chosen by rent-seeking bureaucrats, the effective (not just nominal) red tape and bribery may be positively correlated across firms. Using data from three worldwide firm-level surveys, we examine the relationship between bribe payment, management time wasted with bureaucrats, and cost of capital.  Contrary to the efficient grease' theory, we find that firms that pay more bribes are also likely to spend more, not less, management time with bureaucrats negotiating regulations, and face higher, not lower, cost of capital.
ER  -