**<u>Table 3. Interaction regressions of productivity (log)</u>**

||**(1)**|**(2)**|**(3)**|**(4)**|**(5)**|**(6)**|
|---|---|---|---|---|---|---|
|Corruption (log)|0.107|0.238|-0.121|1.239**|-6.455***|-5.542**|
||(0.240)|(0.307)|(0.321)|(0.609)|(2.215)|(2.201)|
|Regulation (log)|0.653*|1.805***|0.391|0.015|-2.432|-1.315|
||(0.340)|(0.524)|(0.399)|(1.120)|(3.489)|(3.394)|
|Corruption*Regulation (log)|-5.139**|-14.676***|-8.594**|-10.547**|-8.893**|-9.980**|
||(2.151)|(3.407)|(3.909)|(4.238)|(4.123)|(4.548)|
|Firm size (log)|0.024|-0.011|0.033|0.033|0.062|0.059|
||(0.018)|(0.029)|(0.023)|(0.023)|(0.041)|(0.042)|
|Firm age|0.099***|0.166***|0.076**|0.073**|0.014|0.019|
||(0.027)|(0.040)|(0.031)|(0.031)|(0.053)|(0.052)|
|Exports (D)|0.183***|0.221***|0.074|0.069|0.244***|0.229***|
||(0.058)|(0.083)|(0.052)|(0.051)|(0.090)|(0.089)|
|Foreign ownership (share)|0.503***|0.587***|0.206**|0.208**|0.419***|0.421***|
||(0.071)|(0.107)|(0.095)|(0.094)|(0.149)|(0.150)|
|Overdraft (dummy)|0.361***|0.389***|0.190***|0.191***|-0.013|-0.010|
||(0.042)|(0.065)|(0.057)|(0.056)|(0.086)|(0.086)|
|Fully constrained (D)|-0.335***|-0.269***|-0.029|-0.029|-0.109|-0.121|
||(0.055)|(0.075)|(0.071)|(0.071)|(0.089)|(0.090)|
|Partially constrained (D)|-0.170***|-0.179***|0.006|0.000|-0.043|-0.058|
||(0.044)|(0.061)|(0.048)|(0.048)|(0.077)|(0.079)|
|Training (D)|0.194***|0.137**|-0.086|-0.083|0.073|0.064|
||(0.042)|(0.057)|(0.057)|(0.057)|(0.091)|(0.091)|
|Certification (D)|0.240***|0.316***|0.273***|0.271***|0.118|0.122|
||(0.058)|(0.096)|(0.058)|(0.059)|(0.095)|(0.096)|
|Bought assets (D)|0.099***|0.117**|0.058|0.057|-0.014|-0.010|
||(0.037)|(0.053)|(0.046)|(0.046)|(0.077)|(0.076)|
|Skills (share of labor)||0.516***|0.114|0.112|0.135|0.109|
|||(0.083)|(0.071)|(0.070)|(0.103)|(0.105)|
|Raw material per worker (USD)|||0.559***<br>|0.559***<br>|0.469***<br>|0.471***<br>|
||||(0.023)|(0.023)|(0.033)|(0.033)|
|Corruption-squared||||-2.527**||-2.285**|
|||||(1.040)||(1.062)|
|Regulation-squared||||1.468||5.934*|
|||||(3.345)||(3.264)|
|Fixed effects<sup>a</sup>|Yes|Yes|Yes|Yes|Yes|Yes|
|Interactive terms<sup>b</sup>|No|No|No|No|Yes|Yes|
|Number of observations|39,650|28,979|17,132|17,132|17,132|17,132|
|Number of countries<br>|111<br>|111<br>|111<br>|111<br>|111<br>|111<br>|
|R2<br>|0.350<br>|0.345<br>|0.687<br>|0.689<br>|0.706<br>|0.707|
|**_Estimated c_**|**_oefficient of_**|**_corruption at_**|**_different per_**|**_centiles of re_**|**_gulation_**||
|**_25th_**|-0.098|-0.349|-0.378|0.1136|-0.453*|-0.046|
||(0.189)|(0.244)|(0.261)|(0.293)|(0.248)|(0.281)|
|**_50th_**|-0.355**|-1.082***|-0.636***|-0.101|-0.713***|-0.221|
||(0.169)|(0.260)|(0.246)|(0.284)|(0.212)|(0.258)|
|**_75th_**|-0.869***|-2.697***|-1.495***|-1.055**|-1.406***|-0.933**|
||(0.291)|(0.539)|(0.483)|(0.503)|(0.475)|(0.453)|

Note: Standard errors in brackets. Significance is denoted by *** (1%), ** (5%), * (10%). a/Fixed effects included are: country, industry, sector, region and year. b/Both regulation and corruption are interacted with all explanatory variables in the analysis. Following variables are also included in the regression but are not reported in the table: GDP per capita, manager’s experience, manager’s gender, whether firms reported courts being fair; whether firms experienced crime.

25