Why Do Firms Hide? Bribes and Unofficial Activity after Communism

Johnson, Simon; Kaufmann, Daniel; McMillan, John; Woodruff, Christopher M.

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Why Do Firms Hide? Bribes and Unofficial Activity after Communism

Conference Paper, The Nobel Symposium in Economics - The Economics of Transition, Stockholm, September 1999

Posted: 19 Nov 1999

See all articles by Simon Johnson

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

Daniel Kaufmann

Results for Development; The University of the Philippines Diliman; The Brookings Institution

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Christopher M. Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

There are 2 versions of this paper

Date Written: June 1999

Abstract

Our survey of private manufacturing firms finds the size of hidden "unofficial" activity to be much larger in Russia and Ukraine than in Poland, Slovakia and Romania. A comparison of cross-country averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three Eastern European countries find that bureaucratic corruption is significantly associated with hiding output.

JEL Classification: H19, H26

Suggested Citation: Suggested Citation

Johnson, Simon and Kaufmann, Daniel and McMillan, John and Woodruff, Christopher, Why Do Firms Hide? Bribes and Unofficial Activity after Communism (June 1999). Conference Paper, The Nobel Symposium in Economics - The Economics of Transition, Stockholm, September 1999, Available at SSRN: https://ssrn.com/abstract=193251