Effects of bribery on natural resource efficiency in Vietnam: moderating effects of market competition and credit constraints

Abstract

This article uses small and medium-sized enterprises’ (SMEs) survey data in Vietnam from 2007 to 2015 to examine the effects of bribery on the natural resource efficiency of firms facing credit constraints and market competition. We also employ the disaggregated resource intensity by water, fuel, and electricity. Credit-constrained firms are broken down into those who have had formal loan applications denied (credit rationed) and those who do not apply for formal loans due to either the process being too difficult or the interest rate being too high (discouraged borrowers). Applying instrumental variable method to take into account the endogeneity problem, the empirical results provide evidence to support the ‘sanding-the-wheels of resource efficiency’ hypothesis. Among the three natural resources, inefficiency is most evident in water consumption. Furthermore, the effects become more sizable for micro-sized and informally registered firms since they have a lower bargaining power vis-à-vis public officials. Credit constraints and market competition pressure can reduce a firm’s ability to use natural resources efficiently.