While the OECD Anti-Bribery Convention has been extremely successful at reducing bribes paid by firms from signatory countries, bribes paid by firms from non-signatories have actually increased. Why? In this article in the Quarterly Journal of Political Science, Terry Chapman, Nate Jensen, Eddy Malesky and Scott Wolford use a formal model and data from foreign investors in Vietnam to answer this fascinating puzzle.
When do well-intended regulatory regimes have unintended consequences? Eddy Malesky and co-authors Terrence L. Chapman, Nathan M. Jensen, and Scott Wolford examine one obstacle to successful regulation, “regulatory leakage,” in the context of the OECD Anti-Bribery Convention (ABC). Leakage occurs when regulated behavior decreases for actors under a regime’s jurisdiction, but increases among those outside of it. They analyze a formal model that demonstrates how the ABC may simultaneously reduce bribery among firms from member countries, while increasing bribery by firms from non-ABC member countries. They also show how the ABC may lead firms from ABC member countries to shift to bribery through intermediaries. New empirical evidence of MNC activity in Vietnam shows evidence of both regulatory leakage and bribery through intermediaries.
Terrence L. Chapman, Nathan M. Jensen, Edmund J. Malesky and Scott Wolford (2021), “Leakage” in International Regulatory Regimes: Did the OECD Anti-bribery Convention Increase Bribery?”, Quarterly Journal of Political Science: Vol. 16: No. 4, pp 387-427. http://dx.doi.org/10.1561/100.00019193