Corruption as a Key Driver of Informality: Cross-Country Evidence on Bribery and Institutional Weakness

This study investigated the impact of corruption on the persistence of informality across countries, offering new insights into the institutional dynamics that sustain informal economic activities. Drawing on firm-level data from World Bank Enterprise Surveys covering 159 countries, the analysis employed quantitative methods in Stata to assess four indicators of informality against five exogenous variables. These variables captured key institutional constraints, including corruption (with a focus on bribery), bureaucratic inefficiencies, and infrastructure deficits. Results revealed both linear and nonlinear effects of corruption on informality, suggesting that firms embedded in corrupt environments are more likely to remain informal over time. The role of political networks as facilitators of corruption is particularly significant in developing economies, where informal firms benefit from weak enforcement and institutional loopholes. The findings underscore the structural nature of informality and highlight corruption as a critical barrier to sustainable economic development. By exposing how informal payments and institutional weakness interact, this study contributes to global efforts to promote inclusive growth and effective governance under the Sustainable Development Goals (SDGs), particularly SDG 8 and SDG 16.

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Publication Details

Journal
Economies
Published
2025-09-28
DOI
https://doi.org/10.3390/economies13100281
Primary Topic
Taxation and Compliance Studies
Type
article
Field-Weighted Citation Impact
0.00

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article

Corruption as a Key Driver of Informality: Cross-Country Evidence on Bribery and Institutional Weakness

Jhon Valdiglesias Oviedo
Economies
Taxation and Compliance Studies
article

Corruption as a Key Driver of Informality: Cross-Country Evidence on Bribery and Institutional Weakness

Jhon Valdiglesias Oviedo
article en

Abstract

This study investigated the impact of corruption on the persistence of informality across countries, offering new insights into the institutional dynamics that sustain informal economic activities. Drawing on firm-level data from World Bank Enterprise Surveys covering 159 countries, the analysis employed quantitative methods in Stata to assess four indicators of informality against five exogenous variables. These variables captured key institutional constraints, including corruption (with a focus on bribery), bureaucratic inefficiencies, and infrastructure deficits. Results revealed both linear and nonlinear effects of corruption on informality, suggesting that firms embedded in corrupt environments are more likely to remain informal over time. The role of political networks as facilitators of corruption is particularly significant in developing economies, where informal firms benefit from weak enforcement and institutional loopholes. The findings underscore the structural nature of informality and highlight corruption as a critical barrier to sustainable economic development. By exposing how informal payments and institutional weakness interact, this study contributes to global efforts to promote inclusive growth and effective governance under the Sustainable Development Goals (SDGs), particularly SDG 8 and SDG 16.

EconomiesVol. 13(10)
National University of San Marcos (PE)
Universidad Nacional Mayor de San Marcos
Openalex Percentile: Top 65%
Taxation and Compliance Studies
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