Understanding the links between firm size, exposure to public officials, and firm corruption

In this paper, we investigate how firm-level characteristics impact firms' choice to engage in corrupt activities at both the extensive and intensive margins. Using World Bank Enterprise Survey data that covers 68 countries over 11 years, we find that the number of requests for licenses and permits has a positive and significant effect on the probability of paying bribes (the extensive margin), while firm sales have a positive and significant effect on the magnitude of bribe payments (the intensive margin). Sector-specific analysis also shows that bribe payments are more sensitive to sales in services than in manufacturing, suggesting that corruption may have a more distorting effect on economic activities in the service sector.