The Determinants of Cross-Border Corruption

Abstract

We leverage on the structure of a dataset of observed cases of cross-border graft, where a firm headquartered in a country bribes public officials in another country, to provide cross-national evidence on the determinants of corruption of public officials by foreign firms. We also consider the “relational aspects” of corrupt relationships, which come to the fore when focusing on bribing where the parties involved reside in different countries.We find that economic development and small country size is associated with lower levels of corruption, as are freedom of the press, political rights, the presence of established democratic institutions, and the salience of women’s role in society. We highlight the differences between our results, and those that emerge when using other types of measures of corruption. We find some evidence that relational aspects matter in determining cross-border acts, beyond geographic distance between countries, whose negative effect on occurrences of graft emerges even after we control for bilateral trade. Cultural traits, such as sharing the same religion, and power distance, influence corruption, respectively with a negative and a positive sign.