Enterprises Dealing with Corruption: A Microeconomic Analysis

AuthorErmira Hoxha Kalaj
PositionAleksander Moisiu University, Durres
Pages119-126
ISSN 2410-3918 Academic Journal of Business, Administration, Law and Social Sciences Vol 1 No 1
Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania March 2015
119
Enterprises Dealing with Corruption: A Microeconomic Analysis
PhD Ermira Hoxha Kalaj
Aleksander Moisiu University, Durres
Abstract
is article focuses on survey data and qualitative evidence from Albanian manufacturing rms
to examine the scale and consequences of corruption and tax evasion at the enterprise level. It
discusses the costs and benets from the entrepreneur’s perspective. e vector of covariates
includes information about; use of external nance, policy inuence, experience of corruption,
rms size and ownership structure. To control for dierences in the availability of collateral, the
proportion of the xed assets is included. e models used in the paper are probit where the
dependent variable is binary and ordered probit where the dependent variable is categorical and
orderable. Empirical results show that manufacturing rms operating in an environment in which
tax evasion is more prevalent are more likely to suer demands for bribes from corrupt ocials.
e regression analysis shows that tax evasion is a matter of degree and that is not limited to small
and medium-sized enterprises. Even quite large rms acknowledge concealing part of their sales
from tax authorities. Enterprises that are evading taxes are less likely to obtain an external audit.
In addition, the data predict that corruption and tax evasion is more likely to occur when the
principal owner is male rather than female. Moreover, ndings show that the main eect of the
separation of ownership on the likelihood of bribery is insignicant.
Keyword s: corruption, tax evasion, ordered probit, survey data, enterprises.
Introduction
e lack of eciency associated with government intervention and corruption in many
developing countries are well known. Corruption may aect the extent of competition.
Corruption can be described as an action in which the public power is used for personal
gain (Jain, 2001). From the denition it is clear that there are three conditions necessary
for the corruption to arise: discretionary power, economic rents, and weak institutions.
In contexts of weak states and underdeveloped civil societies rms may exert inuence
on the state. Such inuence may have impact on the direction of reforms and on the
quality of governance in transition countries. e way rms interact with the state has
an important implication in understanding the dynamics of corruption. Studies on the
phenomenon recognize dierent forms of it, ranging from grand to petty corruption.
is paper analyses corruption with particular focus on identifying the nature of the
phenomenon. Corruption is related with the country’s economic, cultural and political
institutions (Svensson, 2005). According to the literature at least two relevant categories
of public corruption exist: the political and administrative corruption (Bardhan, 1997;
Warren, 2004). Administrative corruption refers to the petty forms of bribery related with
the implementation of the the laws and regulations. Whereas the political corruption refers
to the capacity of rms to inuence the formation of the laws, reguations, and decrees.

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