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CROSS‐COUNTRY EVIDENCE OF CORRUPTION SPILLOVERS TO FORMAL AND INFORMAL ENTREPRENEURSHIP
Author(s) -
Berdiev Aziz N.,
Saunoris James W.
Publication year - 2020
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12426
Subject(s) - ceteris paribus , entrepreneurship , language change , economics , informal sector , empirical evidence , developing country , robustness (evolution) , labour economics , development economics , business , market economy , economic growth , microeconomics , finance , biochemistry , chemistry , literature , epistemology , gene , art , philosophy
Using cross‐country data this paper examines the spillovers of corruption to formal and informal entrepreneurship in neighboring countries. Whereas research has shown that entrepreneurs move underground to escape corruption, we argue that entrepreneurs may also seek refuge in neighboring countries. Indeed, the empirical results show that in response to a ceteris paribus increase in corruption in neighboring countries formal entrepreneurship increases in the home country with no effect on informal entrepreneurship. This is consistent with entrepreneurs circumventing corrupt public officials by immigrating to countries with presumably less corruption. These results withstand a battery of robustness checks. ( JEL D73, L26)