We provide a firm-level analysis of the relation between corruption and growth for private firms and state-owned enterprises (SOEs) in Vietnam. We obtain three different measures of the perceived corruption severity from a 2005 survey among 741 private firms and 133 SOEs. We find that corruption hampers the growth of Vietnam's private sector, but is not detrimental for growth in the state sector. We document significant differences in the corruption severity across 24 provinces in Vietnam that can be explained by the quality of provincial public governance (such as the costs of new business entry, land access, and private sector development policies). Our results suggest that corruption may harm economic growth because it favors the state sector at the expense of the private sector and that improving the quality of local public governance can help to mitigate corruption and stimulate economic growth.

Corruption, Governance, Growth, Private firms, State-owned enterprises
dx.doi.org/10.1016/j.jbankfin.2012.03.027, hdl.handle.net/1765/37160
ERIM Top-Core Articles
Journal of Banking & Finance
Erasmus Research Institute of Management

Nguyen, T.T, & van Dijk, M.A. (2012). Corruption, growth, and governance: Private vs. state-owned firms in Vietnam. Journal of Banking & Finance, 36(11), 2935–2948. doi:10.1016/j.jbankfin.2012.03.027