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Predictable Corruption and Firm Investment: Evidence from a Natural Experiment and Survey of Cambodian Entrepreneurs

Edmund J. Malesky and Krislert Samphantharak

This paper utilizes a unique dataset of 500 firms in ten Cambodian provinces and a natural experiment to rigorously test one of the most important propositions in political economy; that the predictability of a corruption is more important for firm investment decisions than the amount of bribes a firm must pay, provided the bribes are not prohibitively expensive. We find persuasive evidence that this hypothesis is correct.

 

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