Abstract
AbstractWhen corruption becomes a significant barrier to develop domestic business, do firms resort to exporting as a solution? In other words, is there a ‘shelter effect’ of exporting? We build a simple model to analyse the effects of corruption on firms’ domestic versus foreign market sales. The model predicts that when corruption increases the cost of domestic sales, large firms increase exports relative to domestic sales, whereas small firms do the opposite. Using data from the World Bank Enterprise Surveys, we provide supportive evidence to these predictions. We also find the ‘shelter effect’ to be weaker for politically connected firms.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.