Back in 2014, I shared a World Bank study that measured how tax complexity facilitates more corruption by government officials.
Not that anyone should have been surprised. Complex tax codes enable politicians to extort bribes when writing the law (a problem that definitely exists in Washington) and they makes it possible for bureaucrats to extort bribes when administering the system.
Now the World Bank has a new study showing how a larger regulatory burden enables and facilitates corruption.
The two authors, Mohammad Amin and Yew Chong Soh, wanted to use better types of data to get an accurate assessment of the problem.
Business regulations often create opportunities for public officials to collect bribes… If true, this simple insight provides a practical and powerful way for deregulation to combat corruption and its many harmful effects on the economy. …Regulation is often measured by laws on the books rather than the actual regulatory burden on the firms even though it is the latter that is the primary determinant of corruption… The present paper attempts to fill this gap in the literature by using firm-level survey data on the actual corruption and regulatory burden experienced by the firms. …the public choice theory, stresses that regulation is intended to create rents to be distributed between the industry incumbents and the corrupt public officials. In some cases, the main beneficiary of regulation is the industry (regulatory capture view) while in others, it is the politicians and public officials (tollbooth view). …The present paper contributes to the…literature in several ways. …most previous studies have used perceived corruption indices…we depart from the literature by using firms’ experience with corruption instead. … for regulation, we use the actual regulatory burden experienced by the firms rather than rules on the books. This is an important departure from the literature.
For those not familiar with the term, “public choice” refers to research on the self-interested behavior of people in government.
Anyhow, prior research already showed that red tape gave politicians and bureaucrats the ability to extort money from the private economy.
…several studies analyze the possible effects of regulation on corruption. Using macro-level data for a cross-section of 85 countries in 1999, Djankov et al. (2002) look at the relationship between entry regulations and the level of corruption. …Consistent with the tollbooth view, the study finds strong evidence of higher corruption associated with heavier regulation of businesses. Using data from three worldwide firm surveys, Kaufmann and Wei (2000) confirm that when bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms.
The results in the new World Bank study build on the earlier research and confirm (as I noted in a video more than 10 years ago) more power for government means more corruption by government.
Our results show a large positive impact of the regulatory burden on the level of overall corruption as well as petty corruption. For the baseline specification, the overall bribery rate (bribes as percentage of firms’ annual sales) rises by about 0.03 percentage point for each percentage point increase in the regulatory burden. …The results show that irrespective of the set of controls, there is a large positive relationship between Overall Corruption and Time Tax… That is, for each percentage point increase in the regulatory burden, the overall bribe rate increases by 0.028 percentage point. Alternatively, an increase in regulatory burden from its minimum to maximum level leads to 2.8 percentage points increase in the level of overall corruption. This is a large increase given that the mean level of overall corruption equals about 1.1 percent.
By the way, “time tax” is defined as “the average of the percentage of senior management’s time spent in dealing with business regulations”
Here’s a graphic from the study for those of you who like digging into the empirical details.
P.S. The World Bank also released a study last year showing how more regulation reduces business productivity. Needless to say, that ultimately translates into lower wages for workers.
P.P.S. I’ve been asked why the World Bank seems friendlier to good policy than either the International Monetary Fund or Organization for Economic Cooperation and Development. I point out that it’s not uncommon to see quality work from the professional economists at all international bureaucracies, even the IMF and OECD. But the World Bank seems to have a higher percentage of quality research. My guess it that this is a result of its focus on poverty alleviation.
Back in 2012, I asked readers to pretend they were criminals and to contemplate whether they would want to rob a house with armed residents.
This “IQ test” was designed to help people understand that cost-benefit analysis applies to all types of human behavior, including criminality. Some criminals are smart and some criminals are stupid, but all of them want to get the most benefit at the lowest cost.
And, at the risk of understatement, the possibility of getting shot is definitely a potential cost.
But don’t take my word for it. A Colorado TV station has a very revealing story about burglars engaging in cost-benefit analysis.
In the dead of night, when no one is awake — that’s when it’s most likely that a burglar will break into your home. It usually happens in minutes, but of all the house on the block, the thieves picked yours. What about your house made it a target? Two El Paso County jail inmates are spilling their secrets. They are two men behinds dozens of break-ins back in 2011. …Their opportunities came in the form of doors left unlocked, garage doors never closed and patio screens unlatched… When asked, what in a home will make you turn away? …They say any indication on your home or vehicles that you could fight back could keep them away. Inmate #2 explains, “If it’s something that says you’re Republican, you’re not going to get hit because Republicans like their 2nd Amendment rights. They love carrying guns. I’m not going to mess with that guy.” …”I don’t know if you’re in there with a shotgun waiting for me. We’re literally terrified,” Inmate #1 says.
This is common sense, which is why some folks on the left have had epiphanies on the issue of guns.
It also may explain why a strong majority of Americans agreed that gun ownership promotes safety.
Nearly six in 10 Americans say that gun ownership increases safety…58 percent agree with the statement that gun ownership does more to increase safety by allowing law-abiding citizens to protect themselves. …These findings represent a reversal from 1999, when a majority — 52 percent — said gun ownership reduces safety. And they come at a time when 47 percent of American adults say they have a firearm in the household, up from 44 percent in 1999.
There was a very recent episode in Texas that underscores why it’s important for good people to possess weapons.
New Texas gun laws made it possible for a security team at the West Freeway Church of Christ in White Settlement to act quickly and save countless lives of worshipers on Sunday, some lawmakers said. A gunman killed two people before a member of the congregation’s security team fatally shot him. “…we have taken a number of steps to help make sure that our places of worship — which should be a refuge from evils of the world — are safe for all who attend,” Lt. Gov. Dan Patrick said… State Sen. Donna Campbell…said the new law worked. “This is clearly why it was passed,” she said. “Evil is out there. But it’s not the gun. It’s the person who has control of the gun.” …State Rep. Matt Krause, R-Fort Worth, echoed the sentiment. …“The Texas Legislature understood there were some weaknesses in the laws preventing law abiding Texans from protecting themselves,” Krause said. “I think we saw the benefits of those recent laws taking effect.”
The gunman presumably thought the church was filled with unarmed victims.
Thankfully, that wasn’t the case. And this will send a signal to other lunatics. At least in Texas.
An entire town in Georgia is sending a message to bad guys about potentially very high costs.
An unconventional welcome sign greets visitors….addressing would-be criminals and warning them not to cross the locals.“Welcome to Harris County, Georgia,” it reads, sarcastically adding: “Our citizens have concealed weapons. If you kill someone, we might kill you back. We have ONE jail and 356 cemeteries. Enjoy your stay! -Sheriff Mike Jolley.” The sheriff said it’s his saucy way of welcoming people to his county while…warning them that a number of the citizens exercise their right to bear arms. …Jolley said over that the past several years, concealed weapon permits in Harris County have tripled. …Jolley said he is giving out-of-towners fair notice about what they can expect.
Crooks presumably realize that there are some unarmed homes in Harris County, notwithstanding the sign, but this message may influence their cost-benefit analyses.
The bottom line is that there are bad people in the world and gun-free zones (whether in public areas or private homes) tilt the playing field in favor of those bad people.
Early last year, I shared a video explaining that trade deficits generally don’t matter. I even suggested trade deficits might be a sign of economic strength because foreigners who earned dollars were anxious to invest them in the American economy.
I’m recycling this video to make a point about trade and the economy for both Trump supporters and Trump critics.
For Trump supporters, I want them to understand that the trade deficit has increased under his policies. The data from the latest Commerce Department report show that the yearly trade deficit has increased from about $500 billion at the end of the Obama years to a bit over $600 billion during the Trump years.
And the reason I’m making this point is that I want Trump supporters to realize that they shouldn’t be upset about trade balances. Indeed, they should be happy because there’s a strong argument that the trade deficit is increasing in large part because Trump’s pro-growth tax reform and regulatory reform and making America more attractive for foreign investors.
For Trump critics, I want them to understand the same point, though from a different perspective. Many of them have been (correctly) critical of Trump’s protectionism. And they’ve been happy to point out that his taxes on foreign goods haven’t reduced the trade deficit.
But I would like them to contemplate why the economy has continued to grow. Hopefully, they will realize that pro-market policies in other areas are offsetting the damage of protectionism and therefore be more supportive of capitalism.
The Wall Street Journal opined on this topic last year.
President Trump can take a bow that his tax reform and deregulation are working as intended. …The trade deficit grew… This is not bad economic news. Imports grew faster than exports as the U.S. economy accelerated and much of the world slowed. The dollar grew stronger as capital flowed into the U.S., and the trade deficit grew to offset the larger capital inflows as it must by definition under the national income accounts. …a larger trade deficit is a benign byproduct of a healthier American economy. Supply-side policies revived animal spirits and gave the economy a second wind. …The best way to respond to a trade deficit is to ignore it.
From a left-of-center perspective, Fareed Zakaria made the same point in a recent column for the Washington Post.
Trump campaigned relentlessly on the notion that America’s economy was being ruined by large trade deficits. …He promised on the campaign trail in June 2016, “You will see a drop like you’ve never seen before.”In reality, the trade deficit has risen substantially under Trump. …when the United States has grown robustly, its trade deficit has tended to rise. If you want to achieve a sharp decline in the trade deficit, it’s easy — just trigger a recession. …while the United States has a deficit in manufactured goods with the rest of the world, it runs a huge surplus in services (banking, insurance, consulting, etc.). …The United States is also the world’s favorite destination to invest capital, by a large margin. As Martin points out, when you look at this entire picture, “the trade deficit should be something to brag about rather than denounce.” …Trump’s trade policy has been an enormously costly exercise, forcing Americans to pay tens of billions in taxes on imported goods, then using tens of billions of dollars in taxpayer funds to compensate farmers for lost income (because of retaliatory tariffs)… All to solve a problem that isn’t really a problem.
Veronique de Rugy of the Mercatus Center, writing for Reason, summarizes the issue.
President Donald Trump hates the trade deficit. …If elected, he promised, he would “end our chronic trade deficits.” …free traders…explained, a country’s trade balance is determined overwhelmingly by factors such as the U.S dollar serving as a reserve currency, the ratio of savings to investment opportunities at home and abroad, and the relative attractiveness of that country’s investment climate. As long as the United States is growing and remains an attractive place to invest, we Americans will continue to run trade deficits with the rest of the world. …They want these dollars, in part, to buy American exports. …More important, and often overlooked: Foreigners want dollars also to invest in America’s powerful economy. …the current-account deficit is a mirror image of the capital-account surplus. This is why Mark Perry of the American Enterprise Institute describes imports as “job-generating foreign investment surpluses for a better America.” It is thus no surprise that as the American economy grew, the trade deficit also grew.
I’ll close with a chart that’s in the video because it reinforces the three columns cited above.
As you can see, the link between the trade deficit and an investment surplus isn’t just a theoretical construct. It’s an accounting identity.
You can argue I’m being unfair. After all, I pointed out during the last campaign that his voting record in the Senate was almost identical to the voting records of Hillary Clinton and Barack Obama (his vote rating also was similar to supposed moderate Joe Biden when he was a Senator).
But that doesn’t necessarily mean they think the same or have the same agenda. As the cartoon illustrates, Bernie wants to travel at a faster rate in the wrong direction.
And it’s quite likely that he wants to travel farther in the wrong direction. And he may even want to get to a very unpleasant destination.
You don’t have to believe me. You can simply listen to what Bernie Sanders has said, in this video narrated by Maxim Lott.
And if that’s not enough, here’s a video from Reason that has more of Crazy Bernie’s extremist statements.
So what should we think when we examine Bernie’s past statements, review his voting record in Congress, and also analyze his current platform?
Is he a radical? Crazy? A Marxist? A democratic socialist? A socialist democrat? Some combination of all those options?
We obviously have no way of knowing what his real motives and thoughts are, but James Pethokoukis of the America Enterprise Institute speculates whether Sanders has learned anything.
What lessons have the events of the last half century taught Bernie Sanders? …He’s certainly seen a lot that would seem to have direct bearing on his ideology, especially the collapse of the Soviet Union… Was he “very distressed” at the failure of the centrally planned Soviet economy? He certainly should have been, but only offers a condemnation of the authoritarian political system. …No wonder he’d rather talk about Scandinavia as his socialist success story. Those tiny economies score well on just about every economic metric. But there’s more to them than universal healthcare and generous paid leave. The Nordic model, according to a recent JPMorgan report, “entails a lot of capitalism and pro-business policies…” That’s stuff antithetical to the Sanders democratic socialist agenda. Indeed, the report concludes, “A real-life proof of concept for a successful democratic socialist society, like the Lost City of Atlantis, has yet to be found.”
For what it’s worth, Ryan Bourne points out that his agenda is more extreme than Jeremy Corbyn’s (which is not an easy task).
…some commentators are downplaying his socialist credentials, painting the veteran Senator as no more than a moderate social democrat. …To simply label him a socialist, without any caveats, is misleading. But it’s even more grossly misleading to suggest his “democratic socialist” ambitions stop at a Scandinavian-style welfare state. More redistribution is central to his agenda, sure, but he also proposes massive new market interventions, including the Green New Deal, a federal jobs guarantee, expansive price and wage controls… Sanders’ platform goes far beyond any modern social democracy in terms of government size and scope. Indeed, his policies can only be considered moderate if some three-way lovechild of the economics of 1970s Sweden, Argentina, and Yugoslavia’s market socialism is the baseline. …compare Labour’s 2019 manifesto against the Sanders’ economic platform. Doing so makes clear that Bernie is more radical than Corbyn on economics, both in absolute terms and relative to their countries’ respective politics. …Combined with national insurance, Labour’s top marginal income tax rate would have been 52%. Sanders’ top federal income taxrate alone would be 52%, bringing a top combined top rate of around 80% once state and payroll taxes are considered. Sanders wants a new wealth tax too, another option Labour shirked. …where there are differences, it’s because Sanders is offering the more radical leftwing policies. He and Labour both proposed big minimum wage rises, national rent control, mandated employee ownership, and workers on boards, for example. But where Labour proposed 10% worker ownership stakes in large companies, Sanders would mandate 20%… on the role of government, the declared economic platforms are instructive. Call it “democratic socialism,” or just plain old “interventionism,” Bernie Sanders is, in many respects, putting a more radical interventionist offer to the electorate than Jeremy Corbyn did.
Interestingly, social democrats from Nordic nations think Bernie Sanders is too far to the left.
Johan Hassel, the international secretary for Sweden’s ruling Social Democrats, visited Iowa before the caucuses, and he wasn’t impressed with America’s standard bearer for democratic socialism, Sen. Bernie Sanders (I-Vt.). “We were at a Sanders event, and it was like being at a Left Party meeting,” he told Sweden’s Svenska Dagbladet newspaper… “It was a mixture of very young people and old Marxists, who think they were right all along. There were no ordinary people there, simply.” …Lars Løkke Rasmussen, then the prime minister of Denmark, made a similar point in a speech at Harvard in 2015, when Sanders was gaining national attention. “I know that some people in the U.S. associate the Nordic model with some sort of socialism,” he said. “Denmark is far from a socialist planned economy. Denmark is a market economy”.
Giancarlo Sopo, opining for the Washington Examiner, worries that Sanders actually is an unrepentant Marxist.
Sanders is not the nice, Nordic-style “democratic socialist” he claims to be. At his core, Sanders is almost certainly an all-out Marxist. …The man has no business being anywhere near the Oval Office — not even on a guided tour. …Sanders has been an unabashed apologist for communism, an evil ideology with a body count of 100 million people dead in its wake. …While people such as my grandfather were languishing as political prisoners in Cuba, Sanders said that he was so “excited” about the island’s communist revolution that watching JFK get tough on Fidel Castro made him want to “puke.” …The 78-year-old presidential candidate even honeymooned in the Soviet Union and came back full of praise for it. Some may not grasp how bizarre this was during the Cold War… Sanders’s platform, which openly calls for nationalizing major industries such as higher education, healthcare, and even the internet, falls well outside the mainstream of U.S. politics and more closely resembles the central planning committees in Cuba and Venezuela.
Last but not least, in a column for the Wall Street Journal, Elliot Kaufman compares Sanders’ radical past with his modern rhetoric.
Campaigning for U.S. Senate in 1971, he demanded the nationalization of utilities. In 1973 he proposed a federal takeover of “the entire energy industry,” and in 1974 he wanted a 100% tax on all income above $1 million. In 1976 he asserted that workers needed to “take immediate control of the economy if we are to survive” and called for “public ownership of utilities, banks and major industries.” He had a plan for “public control over capital.” As late as 1987 he asserted that “democracy means public ownership of the major means of production.” …He had also begun a dalliance with the Socialist Workers Party, a communist group that had followed Leon Trotsky. Mr. Sanders endorsed the SWP’s presidential nominee in 1980 and 1984, spoke at SWP campaign rallies during that period, and in 1980 was part of its slate of would-be presidential electors. …After three decades in Congress, he has settled on a populist vision that fits in on the Democratic left. In a major speech last June elaborating his idea of socialism, he cast himself in the tradition of Franklin D. Roosevelt… He enumerated a series of positive rights—to “quality health care,” “as much education as one needs,” “a good job that pays a living wage,” “affordable housing,”… But he said nothing about state control over the means of production or Fidel Castro’s revolution.
So who’s the real Bernie Sanders?
I have no idea whether he still wants government ownership and control of the means of production (i.e., pure socialism with state-run factories, collective farms, etc). I also don’t know whether his past support for awful Marxist dictatorships meant he actually was a Marxist.
A few years ago, I created a three-pronged spectrum in an attempt to illustrate the various strains of leftism.
I’ve decided to create a more up-to-date version. It shows that the Nordic nations are part of the rational left. A bit further to the left are conventional leftists such Joe Biden, Hillary Clinton, and then Barack Obama.
At that point, there’s a divergence, with Hitler and Stalin representing totalitarian socialism at the top and pure socialists (such as the U.K.’s Clement Attlee, who nationalized industries and sectors after World War II) at the bottom.
Without knowing what he truly thinks, I’ve put Bernie Sanders in a middle category for “Crazies.”
I suspect he has sympathies for the two other strains of leftism, but the real-world impact of his policies is that America would become an even-worse version of Greece (though hopefully not as bad as Venezuela).
P.S. Given that he’s now the leading candidate to win the Democratic Party’s nomination, and given that he’s ahead in some national polls, I’m very thankful that America’s Founders bequeathed to us a system based on separation of powers. If Sanders somehow makes it to the White House, he’ll have a very difficult time pushing through the radical parts of his agenda. Yes, it’s true that recent presidents (both Obama and Trump) have sought to expand a president’s power to unilaterally change policy, but I feel confident that even John Roberts and the rest of the Supreme Court would intervene to prevent unilateral tax increases and nationalizations.
P.P.S. More than 10 years ago, I speculated that America’s separation-of-powers system would save the country from Obamacare and cap-and-trade. I was half right.
Back in 2012, I warned that the value-added tax (a hidden version of a national sales tax) was enabling bad fiscal policy in Japan, in large part because politicians wouldn’t make much-needed entitlement reforms if they had the option of raising the VAT.
Later that year, I repeated my warning, noting that politicians in Japan were becoming increasingly vocal about grabbing more money.
Unsurprisingly, these warnings had no effect. In 2013, Japan’s politicians announced the VAT would increase the following year.
Needless to say, Japan’s politicians didn’t learn from this mistake. Notwithstanding my warnings in 2018 and 2019, they just increased the VAT yet again.
So how’s that working out for them?
In a column for the Wall Street Journal, Mike Bird discusses the economic impact of the most-recent increase in the value-added tax.
Japan’s economy shrank sharply in the final three months of 2019, logging its second-worst quarter in the past decade. That would be easier to stomach if it weren’t because of a mistake policy makers have now made three times. In October, Japan raised its sales tax to 10% from 8%—and spending tanked. Household consumption fell 11.5% on an annualized basis in the October-December quarter, fueling a 6.3% fall in annualized gross domestic product. Sales-tax increases in 1997 and 2014 likewise knocked the economy off course. The three worst quarters for household consumption in the past quarter-century were those in which sales tax was raised. …the thinking that led to such destructive behavior is bizarrely resilient.
Here’s the accompanying chart, which shows how every increase in the VAT caused a drop in consumption.
For what it’s worth, I don’t find this chart very persuasive.
Yes, consumption drops in the short run when there’s an increase in the VAT, but there doesn’t seem to be any impact on the long-run trend.
But I’m digressing. Let’s get back to Japan’s VAT mistake.
The Wall Street Journalopined on the issue earlier this week.
The third time wasn’t the charm for Tokyo’s long-running attempt to increase its consumption tax. Data released Monday show Japan’s economy contracted in the last three months of 2019 as the tax hike hammered growth—as many warned and like the previous two times the tax has been raised since its 1989 introduction, in 1997 and 2014. …Wage growth is anemic despite a tight labor market, and the Labor Ministry calculates that inflation-adjusted pay fell 3.5% from 2012-2018. The tax rise creates a new and higher squeeze on household incomes. …The usual suspects are now calling for more Keynesian spending on public works and social spending. Three decades of similar blowouts have created the fiscal mess that always becomes justification for more consumption-tax hikes. …It’s too late for Japan to avoid the costs of Mr. Abe’s economic failures. But other governments can learn the lessons that Japan’s leaders refuse to heed.
Unfortunately, other leaders aren’t learning the right lessons.
Let’s close by citing three additional sentences from the WSJ editorial.
The fiscal pyromaniacs at the IMF want even further VAT increases in Japan.
The International Monetary Fund thinks the consumption-tax rate will have to rise to 15% over the next decade, and to 20% by 2050. But first the fund’s wizards say Tokyo must expand its Keynesian spending to make the economy “strong” enough to bear the tax hikes to pay for the spending. Got that?
I wrote last year about the IMF’s perverse fixation on ever-increasing VAT burdens in Japan, so I’m not surprised that the international bureaucracy is continuing its campaign.
It enables politicians to siphon money from the productive sector of the economy, whether we’re looking at poor nations or rich nations.
By contrast, it’s difficult to generate more revenue from the personal income tax because of the Laffer Curve.
P.S. Some VAT advocates actually claim the levy is good for growth. That’s a nonsensical claim. VATs drive a wedge between pre-tax income and post-tax consumption. What they really mean to say is that VATs don’t do as much damage, on a per-dollar-raised basis, as conventional income taxes (with punitive rates and double taxation).
So, in the interest of fair play and equal time, here’s a test that purports to tell you whether you’re actually a communist.
Here’s the short description.
Communism is a social and political ideology whose ultimate goal is the establishment of a communist society, which is defined as a socioeconomic order based on common ownership and the absence of social classes, inequality, and private property. While Communism encompasses several of schools of thought, this test uses the classical Marxist texts and history as its foundations to determine whether you qualify as a Marxian communist.
By the way, I can’t resist commenting on the ludicrous assertion that communism is a “socioeconomic order based on…the absence of…inequality”.
Let’s focus on the quiz, and I’ll simply note that not all of the questions have easy answers.
For instance, how should Question #8 be interpreted? There are plenty of nations in Europe that have very large governments, yet very high levels of political freedom. So is the correct answer to “disagree”?
But that requires us to decide what is meant by “absence of a free market economy.” Does this imply the technical meaning of socialism, involving government ownership, central planning, and price controls? If so, then world history suggests the correct answer is “agree.”
Or should one “partly agree” or “partly disagree,” meaning the choices closer to the middle?
I also have mixed views about the correct answer to Question #12.
I’d like to strongly disagree, but would that answer simply be a reflection of society as I’d like it to be?
In reality, some people do see themselves of members of groups.
But if tax rates are low for people making $65,000, there’s no reason why they wouldn’t work hard.
It would have been better if the question asked whether people “would work hard in countries where they cannot improve their living standards from their work.”
Last but not least, I’m also not sure how to interpret Question #15.
Who determines an “individual’s best interests”? For some people, that may mean stealing money from the elderly. If so, the answer is disagree.
But if we’re operating in a moral framework and asking whether the pursuit of self interest makes society better, the answer is agree.
I mention these caveats because I want a good excuse for the fact that I didn’t get a perfect score.
According to the quiz (here’s another link to it), the bad news is that I’m 6-percent commie.
Though the good news is that means I’m in the “Not Communist” grouping.
My bottom line is that I would be 0-percent commie if the questions were designed properly!
P.S. Instead of bothering with the quiz, you can use two cows to determine whether you’re a communist.
Not that anyone should have been surprised. Complex tax codes enable politicians to extort bribes when writing the law (a problem that definitely exists in Washington) and they makes it possible for bureaucrats to extort bribes when administering the system.The present paper attempts to fill this gap in the literature by using firm-level survey data on the actual corruption and regulatory burden experienced by the firms. …the public choice theory, stresses that regulation is intended to create rents to be distributed between the industry incumbents and the corrupt public officials. In some cases, the main beneficiary of regulation is the industry (regulatory capture view) while in others, it is the politicians and public officials (tollbooth view). …The present paper contributes to the…literature in several ways. …most previous studies have used perceived corruption indices…we depart from the literature by using firms’ experience with corruption instead. … for regulation, we use the actual regulatory burden experienced by the firms rather than rules on the books. This is an important departure from the literature.
