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Revealing Corruption: Firm and Worker Level Evidence from Brazil
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Revealing Corruption: Firm and Worker Level Evidence from Brazil

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  • Emanuele Colonnelli
  • Spyridon Lagaras
  • Jacopo Ponticelli
  • Mounu Prem
  • Margarita Tsoutsoura

Abstract

We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption cases. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.

Suggested Citation

  • Emanuele Colonnelli & Spyridon Lagaras & Jacopo Ponticelli & Mounu Prem & Margarita Tsoutsoura, 2022. "Revealing Corruption: Firm and Worker Level Evidence from Brazil," NBER Working Papers 29627, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29627
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    2. Julia Fonseca & Adrien Matray, 2022. "Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil," Working Papers 308, Princeton University, Department of Economics, Center for Economic Policy Studies..
    3. Gallego, Jorge & Prem, Mounu & Vargas, Juan F., 2022. "Predicting Politicians' Misconduct: Evidence from Colombia," SocArXiv 5dp8t, Center for Open Science.
    4. Nicolae Stef, 2021. "Institutions and corporate financial distress in Central and Eastern Europe," European Journal of Law and Economics, Springer, vol. 52(1), pages 57-87, August.
    5. De Simoni, Marco & Guiso, Luigi & Macchiavello, Rocco & Marchetti, Domenico J. & Prem, Mounu, 2024. "Mafias and Firms," CEPR Discussion Papers 18982, C.E.P.R. Discussion Papers.
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      • Arellano-Bover, Jaime & De Simoni, Marco & Guiso, Luigi & Macchiavello, Rocco & Marchetti, Domenico J. & Prem, Mounu, 2024. "Mafias and Firms," IZA Discussion Papers 16893, Institute of Labor Economics (IZA).
      • Arellano-Bover, Jaime & De Simoni, Marco & Guiso, Luigi & Macchiavello, Rocco & Marchetti, Domenico J. & Prem, Mounu, 2024. "Mafias and Firms," SocArXiv sr6ep, Center for Open Science.
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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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