Globalization and corruption in post-Soviet countries: perverse effects of economic openness

Abstract

Post-Soviet countries struggle with endemic problems of corruption. While the causes of corruption are many and deeply rooted, one of the factors that may contribute to corruption is globalization. The influence of international economic ties on bureaucratic corruption is frequently overlooked. It is also significant for those interested in addressing corruption because it could potentially be dealt with through straightforward policy change. Economic transition led to significant increases in foreign investment and trade in post-Soviet countries. This article examines bureaucratic corruption by considering the variation in firms’ tendency to pay bribes in each country using self-reported data from surveys of enterprises in 11 post-Soviet countries. Within the context of the same legal and political institutions and cultural environment, trading firms are more likely than non-trading firms to make informal payments to get things done. This is attributable to payments made to deal with customs officials; there is little correlation between trade and bribery for dealing with inspections, taxes, or other types of obstacles. Foreign direct investment does not generally lower the incidence of bribery. However, if the investment’s home country has substantially better control of corruption than does the host country, those firms are less likely to engage in bribery. Finally, firms that report greater pressure from foreign competitors are sometimes more likely to pay bribes, indicating that the increased competitiveness of the global market is not always sufficient to crowd out corruption, but rather increases it.