The Determinants of Cross-border Corruption

Abstract: We leverage on the particular structure of a dataset of observed cases of cross-border graft, where a firm headquartered in a country bribes public officials in another country, to provide cross-country evidence on the determinants of corruption of public officials by foreign firms. We focus in particular on the “relational aspects” of corrupt relationships, which come to the fore when focusing on bribing where the parties involved reside in different countries. We find that cross-border acts of corruption decay with distance, more so than does trade. Poor rule of law increases corruption, as does a higher degree of political stability. Cultural traits matter, in a nuanced way, which depends both on which aspect of culture is considered, and on the cultural proximity of countries.