Take Action

Home | Faculty & Research Overview | Research

Research Details

Caught with the Hand in the Cookie Jar: Firm Growth and Labor Reallocation after Exposure of Corrupt Practices

Abstract

Corrupt practices in the assignment of government contracts are largely diffused and can generate misallocation of resources across firms. We study how disclosure of such practices affects firm growth and labor reallocation. We exploit exogenous variation in the exposure of illegally favored firms using random municipality audits by a large anti-corruption government program in Brazil. Firms exposed by the auditing program experience a decline in employment growth relative to their peers. We document that young, less-educated workers that do not occupy a managerial position have higher probability to leave the exposed firms. Released workers tend to reallocate to firms not found to be illegally favored. Within-sector firm size dispersion decreases in audited municipalities with respect to non-audited ones. Our evidence suggests that random auditing programs can reduce labor misallocation across firms.

Type

Working Paper

Author(s)

Spyros Lagaras, Jacopo Ponticelli, Margarita Tsoutsoura

Date Published

2017

Citations

Lagaras, Spyros, Jacopo Ponticelli, and Margarita Tsoutsoura. 2017. Caught with the Hand in the Cookie Jar: Firm Growth and Labor Reallocation after Exposure of Corrupt Practices.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action