Publication overview

Why do firms hide? Bribes and unofficial activity after Communism

Abstract

Our survey of private manufacturing firms finds the size of hidden “unofficial” activity to be much larger in Russia and Ukraine than in Poland, the Slovak Republic and Romania. A comparison of crosscountry averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three east European countries find that bureaucratic corruption is significantly associated with hiding output.