Table 4: Likelihood to be a demand-side bribe payer, supply-side bribe payer, incorruptible and non bribe payer. Probit model marginal effects

||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|
|---|---|---|---|---|---|---|---|---|
|Dependent variable:|**Bribe d**|**emand**|**Bribe **|**supply**|**Incorru**|**ptibles**|**Non bri**|**be payer**|
|Informal Competition|0.119***<br>(0.0180)|0.163***<br>(0.0404)|0.0145<br>(0.0155)|0.102***<br>(0.0189)|-0.0137<br>(0.0144)|-0.0432<br>(0.0418)|-0.0868***<br>(0.0161)|-0.132***<br>(0.0227)|
|Working capital|-0.00149***|-0.00129|-0.000700|-0.00146|0.000929*|0.00226|0.000754*|0.000858|
|fnanced by banks|(0.000517)|(0.00175)|(0.000537)|(0.00128)|(0.000537)|(0.00224)|(0.000422)|(0.00126)|
|Exporter|0.000712*|0.000261|0.00104**|0.000255|-0.000687|-0.000927|-0.00115**|-0.000282|
||(0.000402)|(0.00180)|(0.000531)|(0.000742)|(0.000716)|(0.000913)|(0.000541)|(0.000770)|
|Foreign share|-0.000132|0.00179|-6.52e-05|0.00179***|-0.000396|-0.00126|0.000311|-0.00199**|
||(0.000477)|(0.00129)|(0.000539)|(0.000601)|(0.000763)|(0.00213)|(0.000482)|(0.000845)|
|Government share|-0.00348***|-0.00324**|-0.000558|-0.00270|-0.00150*|-0.00403***|0.00427***|0.00527**|
||(0.00126)|(0.00149)|(0.000862)|(0.00258)|(0.000774)|(0.00129)|(0.000919)|(0.00225)|
|Ln. Sales|-0.00540|-0.267***|0.00236|-0.130*|-0.00221|-0.221***|0.00334|0.254***|
||(0.0168)|(0.0942)|(0.0135)|(0.0705)|(0.0164)|(0.0844)|(0.0198)|(0.0759)|
|Use of e-mails|0.0864***|-0.0909|0.0670*|0.139|-0.0488|0.121|-0.0384|-0.101|
|and website|(0.0306)|(0.109)|(0.0375)|(0.131)|(0.0331)|(0.114)|(0.0294)|(0.112)|
|Days spent|0.00594***|0.00689|-0.00371**|-0.000785|0.00184|0.00237|-0.00344*|-0.00430|
|in inspections|(0.00184)|(0.00544)|(0.00168)|(0.00116)|(0.00160)|(0.00157)|(0.00189)|(0.00394)|
|Microentreprise|0.106|-0.746***|0.0259|-0.253*|0.0160|-0.536|-0.0973|0.573***|
||(0.0902)|(0.262)|(0.132)|(0.140)|(0.0866)|(0.347)|(0.139)|(0.203)|
|Small|0.147**|-0.336*|-0.00874|-0.0921*|-0.0665|-0.339*|-0.0447|0.302**|
||(0.0729)|(0.186)|(0.104)|(0.0546)|(0.0681)|(0.198)|(0.114)|(0.142)|
|Medium|0.105**|-0.144|-0.0459|-0.0793|-0.0448|-0.396***|-0.0363|0.224***|
||(0.0531)|(0.124)|(0.0752)|(0.0657)|(0.0626)|(0.0938)|(0.0782)|(0.0607)|
|Ln. Investment||0.0447*||0.0489***||0.0407||-0.0674***|
|in capital|||||||||
|||(0.0229)||(0.0178)||(0.0332)||(0.0211)|
|Ln. Profts||0.155*||0.0611||0.156||-0.137**|
|||(0.0874)||(0.0471)||(0.0985)||(0.0655)|
|Ln. Stock of capital||-1.33e-07||4.08e-07***||-4.53e-06||-4.31e-07***|
|||(6.16e-07)||(6.02e-08)||(4.71e-06)||(8.43e-08)|
|Observations|17,456|1,769|15,279|2,282|17,116|1,939|15,550|2,251|
|Pseudo _R_<sup>2</sup>|0.277|0.282|0.171|0.157|0.183|0.123|0.362|0.219|

Notes. All regressions include country, sector, and year fixed effects. Robust standard errors clustered at the country level in parentheses. * _p <_ 0.1; ** _p <_ 0.05; *** _p <_ 0.01.

# **IV.2 Baseline results**

Having examined the characteristics of firms belonging to the various types of bribe payment behavior, we now turn to our main question of examining how these bribe behaviors affect firms’ benefits in two main sectors where corruption is observed, taxation and government contracts. Our baseline specification of the relationship between firms’ benefits and the demand and the supply sides of corruption is first estimated using the Ordinary Least Squares (OLS). Results are presented in Table 5, columns (1) and (4). We observe that both the demand and supply sides of corruption are positively correlated with firms’ tax evasion and for bribing to secure government contracts. However, in both cases, the magnitude of the correlation is higher for the demand side of corruption compared to the supply side. The coefficients are statistically significant at the 1% and 5% levels. These results should, however, be interpreted with caution as they are purely correlation and do not attempt to address various potential endogeneity issues that will be discussed in the next section.

With regard to the control variables, access to bank financing is negatively correlated with both tax evasion and bribing for government contracts. Both foreign and government shares are negatively correlated with sales not reported for tax purposes. On firms’ performance and size effects, sales are negatively associated with sales not reported for tax purposes, while the latter is significantly higher for microenterprises relative to large 15