Economist: Corruption Bad for Business in Emerging Markets

The Economist magazine provides a succint overview of why corruption and bribery are actually counter productive to doing business in emerging markets.  The magazine quotes our colleague Dani Kaufmann (now at the Brookings Institution) in laying out the case for why bribery is bad for business, not just bad ethics:

In a paper published by the World Bank, Daniel Kaufmann and Shang-Jin Wei subjected the “efficient grease” hypothesis to careful scrutiny. They found that companies that pay bribes actually end up spending more time negotiating with bureaucrats. The prospect of a pay-off gives officials an incentive to haggle over regulations. The paper also found that borrowing is more expensive for corrupt companies, probably because of the regulatory flux.

We couldn’t have said it better ourselves.

You can find the Economist article here and Kaufman and Wei’s original analysis here.