IMPACT OF CORRUPTION ON FIRM-LEVEL EXPORT DECISIONS.

This article examines the impact of corruption on the self-selection of firms into domestic and export markets. A heterogeneous firm model predicts that corruption decreases the probability that a firm only sells domestically, increases the probability that a firm exports indirectly through an intermediary, and decreases the probability that a firm exports directly. The propositions of the model are tested using a comprehensive dataset of over 23,000 firms in 80 developing countries. The results confirm both the self-selection of firms according to their productivity and the anticipated impact of corruption. This indicates that in developing countries where corruption is especially severe, intermediaries provide a crucial link to global markets. ( JEL F1, O1) [ABSTRACT FROM AUTHOR]