“Firms’ Growth, Corruption, Taxation and Financial Intermediation in Developing Countries”

Next Wednesday, March 18th, at 2.00pm, the NOVAFRICA Center welcomes Jonathan Goyette, from Sherbrooke University to present his work on distortions on firms’ growth, corruption, taxation and economic development.

Jonathan Goyette

Evidence at the firm-level of the effects of various distortions on firms’ growth focus usually on a distortion in isolation or on a specific country. A systematic examination of the effects of the interactions between various distortions on firms’ growth has yet to be done and might inform on potential avenues to accelerate economic development if there exists substitutabilities between some dimensions of development. This paper takes advantage of firm-level data for a set of emerging and developing countries to examine how pair-wise interactions between corruption, taxation and intermediation affect firm’s growth. I first build a theoretical model and derive a set of comparative statics to guide the interpretation of the empirical results. Using an IV-framework to account for endogeneity issues, I find that corruption and taxation are substitutes, taxation and intermediation are also substitutes while corruption and intermediation seem to be complements in undermining firms’ growth.