Bribery—Export Nexus under the Firm’s Growth Obstacles
Round 1
Reviewer 1 Report
The paper is well argued and structured. I propose some suggestions concerning some research topics that the authors address following a theoretical approach that I personally do not consider entirely convincing. I also ask to clarify the description of the variable Obstacle and moreover the estimation strategy referred to Table 3:
1. row 33. Strong export growth - contrary to what the authors write - does not stabilise the macroeconomy. An example is given by the European Monetary Union where Germany's pursuit of a mercantilist policy has produced highly destabilising intra-area trade imbalances. See in this regard
Bagnai A. (2016), "Italy's Decline and the Balance-of-Payments Constraint: A Multicountry Analysis", International Review of Applied Economics, 30 (1), pp. 1-26.
Cesaratto S. and Stirati A. (2010), "Germany and the European and Global Crises", International Journal of Political Economy, 39 (4), pp.
Economy, 39 (4), pp. 56-86.
Gros D. (2013), "Foreign Debt versus Domestic Debt in the Euro Area", Oxford Review of Economic Policy, 29 (3), pp. 502-517.
Lucarelli S., Andrini F.U. and Bianchi A. (2018), "Euro Depreciation and Trade Asymmetries between Germany and Italy versus the US: Industry-Level Estimates", Applied Economics, 50 (1), pp. 15-34.
2. rows 197-210
There could be another explanation linked to the result obtained by Diaby (2014): access to exports favoured by 'bribery' could be functional to the control of illegal exports (this would seem to be confirmed especially by the recent history of the N'drangheta but also of the Chinese Triad). See the contributions collected in
Leila Simona Talani and Roberto Roccu (edited by), The Dark Side of Globalisation, Palgrave, 2019
and in particular the work of Anna Sergi
https://link.springer.com/chapter/10.1007/978-3-030-05117-4_5
On the Chinese Triad see the following two reports
https://www.loc.gov/rr/frd/pdf-files/ChineseOrgCrime.pdf
http://www.cepii.fr/PDF_PUB/wp/2004/wp2004-04.pdf
3. row 314 ERRATA "scrutinisea", CORRIGE "scrutinises"
4. About the estimation strategy (section 3.1) and the estimation results (section 4.2) : I have doubts as to whether corruption can enter the Obstacles variable. In fact, this may lead to an endogeneity problem between bribery and corruption. The point is to understand how the variable "corruption" is constructed. If this variable is constructed also taking into account bribery (as I think it is in the World Bank dataset that defines the variable ad "Perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests") then in your regressions [Model 1 and Model 2 in section 3,.1] it is necessary to 'clean' the variable Ost from the "bribary" that is present in "corruption", to avoid a bias in the estimation shown in Table 3.
5. I did not well understand why the variable Obs is described in two different ways: the first as [permit, cor, taxad]; the second as [compe, inade, fin]. Please explain.
6. I suggest adding in the appendix a description of the 4 subgroups of countries used in the estimates.
7. In the conclusion you wrote that the paper adopt World Bank dataset combined with CPI provided by Transparency Internationa. But in the description of data in section 3.2 it seems that the variable corruption is part of the World Bank dataset, and it is not expressed as CPI! Please explain
8. I reccomend to rewrite the following thow sentences in the conclusion: "when firms face more severe obstacles, more bribery promotes exports. As a consequence, businesses need to base their characteristics to build acceptable thresholds to achieve the optimal profit of the company". Since the topic is very relevant, it is necessary for the author not only to report the results of the estimates, but to interpret them in order to give policy indications that are as precise as possible. Which obstacles are we talking about specifically? What does setting a good bribery threshold mean in practice? Do we realise that talking about a bribery threshold actually leads to legitimising a negotiation between the state and criminal lobbies?
I want to emphasise that I liked the paper very much and that the fact that I suggest major revision is because I would like to read it again after the author has acted to take my recommendations into account.
Author Response
Dear Sir/Madam,
First of all, I would like to thank you very much for giving us the opportunity to respond to your comments. Your insightful reviews and suggestions help us look at issues more holistically. We have accepted your comments and revised our manuscript. We hope that our efforts can solve the problems you have raised. Given the limitations of time and data, some problems cannot be fully resolved. We appreciate your comments, and we will certainly complete them in future work.
Here, I list the issues you raised, along with our detailed responses point by point. To be more specific, you can see the manuscript file.
Point 1: row 33. Strong export growth - contrary to what the authors write - does not stabilize the macroeconomy. An example is given by the European Monetary Union where Germany's pursuit of a mercantilist policy has produced highly destabilizing intra-area trade imbalances.
Response 1: I agree with you that "strong export growth"does not always bring positive effects for the economy as you recommend. However, there are undeniably some positive values that exports bring to the economy, especially in developing countries. For example,
(1) Kilavuz (2012) studied 22 developing countries. They found that the impact of exports on economic growth depends on the export sector. In particular, the export of high-tech manufacturing has a positive and significant impact on development.
(2) Szkorupová (2014) also found a positive relationship between export and GDP in Slovakia.
(3) Babatunde et al (2012) found that agricultural trade particularly exports are capable of reducing poverty and inequality in Nigeria through the channel of employment and agricultural productivity growth as has been indicated by the link between exports, growth, poverty, and inequality.
(4) Pereire (2000) found a positive relationship between export and GDP in 30 countries.
(5) Some other papers found the positive effect of export on GDP, employment, reducing poverty, creating pro-poor employment and raising wages, etc. in the Vietnamese case. Such as Jenkins, R.(2004). Heo, Y.(2009).
Therefore, I would like to re-write these sentences (lines 33-38): "Developing exports according to a sustainable and reasonable growth model is seen as a solution to open the economy to take advantage of foreign capital and technology of developing countries. Therefore, research on factors
that affect the export of firms is an interesting topic and has practical value. This topic not only attracts the interest of macroeconomic managers but also receives the attention of business managers".
Point 2: rows 197-210 There could be another explanation linked to the result obtained by Diaby (2014).
Response 2: Thank you for pointing out this point. I had a mistake in the quote. those conclusions belong to the study of To (2021). I corrected it in line 202.
Point 3: row 314 ERRATA ßcrutinise", CORRIGE ßcrutinize".
Response 3: Yes. I corrected it
Point 4: About the estimation strategy (section 3.1) and the estimation results (section 4.2): I have doubts as to whether corruption can enter the Obstacles variable. This may lead to an endogeneity problem between bribery and corruption. The point is to understand how the variable "corruptionïs constructed. If this variable is constructed also taking into account bribery (as I think it is in the World Bank dataset that defines the variable ad "Perceptions of the extent to which public power is exercised for private gain, including both
petty and grand forms of corruption, as well as "captureöf the state by elites and private interests") then in your regressions [Model 1 and Model 2 in section 3,.1] it is necessary to ’clean’ the variable Ost from the "bribery" that is present in "corruption", to avoid a bias in the estimation shown in Table 3.
Response 4: Following your suggestion, I replaced the variable "corruption" with the variable "political instability".
The reason is: After I analyzed the data set of the World Bank (2020), the results showed that three obstacles belonging to the group of institutional obstacles including taxes, business licenses, and political instability are assessed as the most difficult. The percentage of enterprises face these three obstacles as the biggest obstacles are the highest.
Therefore, I choose tax administration, business licenses and political instability as representative of institutional obstacles use in Analysis 1.
Then I updated the results in Table 3 and Fig.1 (in lines 450-580).
After that, I modified the further analysis part that applies to SMEs and large companies (in lines 705-740). Then I updated the results in Table 7 and Fig.2.
Overall, the new results still support previous conclusions. Institutional constraints have a positive impact on bribery payments.
Point 5: I did not well understand why the variable Obs is described in two different ways: the first as [permit, cor, taxad]; the second as [compe, inade, fin]. Please explain.
Response 5: Our paper does not focus solely on institutional barriers. The topic we cover is related to a firm’s growth obstacles. According to Bartlett (2001), a firm’s growth obstacles can be classified into four groups: institutional obstacles, external obstacles, internal obstacles, and financing obstacles. Institutional obstacles are considered as factors that directly affect bribery. The remaining impediments have indirect effects on bribery.
Therefore, in Analysis 1, the factors affecting bribery, I chose the group of institutional obstacles to analyze. As I wrote in line 327 (section 3.1 Analysis 1):
"Gamage2019 showed that several barriers interfere directly with a company’s bribery decision, but others interfere indirectly. For example, the tax bracket applicable to a business is determined by law, which is very difficult to change by bribery or the pressure from competitors has a binding relationship with the company’s outcome. These factors may not be the factors that directly influence the firm’s bribery decision but are the indirect factors that motivate the enterprise to bribe to expand production. As a consequence, in these models, I choose a set of three obstacles including tax administration (marked as taxad), business licensing, and permit constraints (denoted as permit), and political instability (denoted as pol) as direct factors that affect bribery of a firm."
In Analysis 2, due to time limitations and for simplification, I selected 3 obstacles from the remaining 3 groups. Specifically, I choose one obstacle from each of the remaining groups. The obstacle representing each group is the one that most firms consider to be the biggest obstacle. However, I have not shown it clearly in the article.
So, I have added an explanation: "As mentioned above, a firm’s growth obstacles might be divided into four groups. Instead of using institutional obstacles as Analysis 1, this section selects obstacles that are likely to affect business operations (such as exports) and indirectly affect bribery in the three
remaining groups. For simplification, I select one obstacle from each of the remaining groups. The obstacle representing each group is the one that most businesses consider to be the biggest obstacle".
Hopefully, that will make things clearer.
The World Bank dataset includes 15 criteria about a firm’s growth obstacles, the limitations of the study did not allow me to test them all. However, this will be my next job in the future. I believe there will be many interesting things to explore.
Point 6: I suggest adding in the appendix a description of the 4 subgroups of countries used in the estimates.
Response 6: I updated the Appendix about the list of countries as per your suggestion.
Point 7: In the conclusion, you wrote that the paper adopts the World Bank dataset combined with CPI provided by Transparency Internationa. But in the description of data in section 3.2, it seems that the variable corruption is part of the World Bank dataset, and it is not expressed as CPI! Please explain.
Response 7: Sorry, It is my fault. Initially, my research paper included a further study using the CPI variable. However, after considering the structure of the paper, I have separated the section that uses the CPI variable into future research.
I fixed this error in lines 777-779
Point 8: I recommend rewriting the following thow sentences in the conclusion: "when firms face more severe obstacles, more bribery promotes exports. As a consequence, businesses need to base their characteristics to build acceptable thresholds to achieve the optimal profit of the company". Since the topic is very relevant, it is necessary for the author not only to report the results of the estimates but to interpret them to give policy indications that are as precise as possible. Which obstacles are we talking about specifically? What does getting a good bribery threshold mean in practice? Do we realize that talking about
Does a bribery threshold lead to legitimizing a negotiation between the state and criminal lobbies?
Response 8: I re-wrote the section Discussion and conclusion in my paper. By this work, I would like to give some policy indications.
About the bribery threshold, It will be mentioned in my future work
Reference
(1) Kilavuz, E., & Topcu, B. A. (2012). Export and economic growth in the case of the manufacturing industry: panel data analysis of developing countries. International Journal of Economics and Financial Issues, 2(2), 201-215.
(2) Szkorupová, Z. (2014). A causal relationship between foreign direct investment, economic growth, and export for Slovakia. Procedia Economics and Finance, 15, 123-128.
(3) Babatunde, M. A., Oyeranti, O. A., Bankole, A. S., & Ogunkola, E. O. (2012). Exports trade, employment, and poverty reduction in Nigeria. International Journal of Social Economics.
(4) Pereira, A. M., & Xu, Z. (2000). Export growth and domestic performance. Review of International Economics, 8(1), 60-73.
(5) Jenkins, R. (2004). Vietnam in the global economy: trade, employment, and poverty. Journal of International Development, 16(1), 13-28.
(6) Heo, Y., & Doanh, N. K. (2009). Trade liberalization and poverty reduction in Vietnam. World Economy, 32(6), 934-964.
(7) Thanh, To Trung, Doan Ngoc Thang, and Pham Thi Hoang Anh. "Bribery, export decisions, and institutional constraints: Evidence from cross-country firm-level data.Ëconomic Analysis and Policy 69 (2021): 585-612.
(8) Bartlett, Will, and Vladimir Bukvic. "Barriers to SME growth in Slovenia."MOST: Economic Policy in Transitional Economies 11, no. 2 (2001): 177-195
Reviewer 2 Report
Review of the paper titled ‘Bribery - Export nexus under the firm’s growth obstacles’:
My general opinion on the paper is very positive, as the author has presented a comprehensive analysis of the issue of bribery affecting export, together with sensitivity analysis and robustness tests. The use of cross-sectional data in numerous countries is an additional asset. The paper is well-structured and scientifically sound.
Major issues:
- The implications stemming from the obtained results need to be extended, as at the moment the paper mainly focuses on the verification of the relationship. In the concluding part, one could dwell more on potential implications for policy, stemming from the obtained results.
- I would change the following sentence on page 1, line 40: Correspondingly, many countries worldwide consider export growth as a key economic goal -> Correspondingly, many countries worldwide and its regions consider export growth as a key economic goal (1007/s00168-019-00947-6).
- Do you control the origin of capital ownership (foreign vs. domestic) as having at least some part of foreign capital can significantly boost export performance and export probability?
Minor issues:
- Page 6, lines 274 and 290: consider changing the way of referencing, maybe to:
Surname (Year) work depicts…
- Page 8, 6th line from the top: demoted -> denoted
I recommend that this paper to be published after the introduction of the minor issues mentioned above.
Author Response
Dear Sir/Madam,
First of all, I would like to thank you very much for giving us the opportunity to respond to your comments. Your insightful reviews and suggestions help us look at issues more holistically. We have accepted your comments and revised our manuscript. We hope that our efforts can solve the problems you have raised. Given the limitations of time and data, some problems cannot be fully resolved. We appreciate your comments, and we will certainly complete them in future work.
Here, I list the issues you raised, along with our detailed responses point by point. To be more specific, you can see the manuscript file.
Thank you for your time and your support.
Sincerely.
Point 1: The implications stemming from the obtained results need to be extended, as at the moment the paper mainly focuses on the verification of the relationship. In the concluding part, one could dwell more on potential implications for policy, stemming from the obtained results.
Response 1: Thank you so much for your comments. I re-wrote the section Discussion and conclusion in my paper. By this work, I would like to give some policy indications. Lines 785-830.
Point 2: I would change the following sentence on page 1, line 40: Correspondingly, many countries worldwide consider export growth as a key economic goal -> Correspondingly, many countries worldwide and their regions consider export growth as a key economic goal (1007/s00168-019-00947-6).
Response 2: As you recommend, I re-write this paragraph (lines 33-38): "Developing exports according to a sustainable and reasonable growth model is seen as a solution to open the economy to take advantage of foreign capital and technology of developing countries. Therefore, research on factors that affect the export of firms is an interesting topic and has practical value. This
topic not only attracts the interest of macroeconomic managers but also receives the attention of business managers".
Point 3: Do you control the origin of capital ownership (foreign vs. domestic) as having at least some part of foreign capital can significantly boost export performance and export probability?.
Response 3: Yes. Line 381-385. I explained the variable "own" that represent foreign ownership:
"Besides, foreign ownership has the potential to influence a firm’s decision to enter the international market and its decision to participate in bribery (Abor2008). Consequently, this study creates a dummy variable (marked as own)
In footnote 2: "According to Abor(2008), companies with more than 10% foreign equity often have better access to information related to foreign markets. Ownership of more than 10% in companies that demonstrate the right to express an opinion at the general meeting of shareholders can influence
decisions in the company’s operations."
Point 4: Page 6, lines 274 and 290: consider changing the way of referencing, maybe to: Surname (Year) work depicts
Response 4: Thank you for your suggestion. I re-wrote this sentence in lines 280 and 297.".
Point 5: Page 8, 6th line from the top: demoted -> denoted
Response 5: I fixed this error in line 392
Round 2
Reviewer 1 Report
The paper is ready to be published.
However, I would be grateful to the authors if they would also add the following sentence with the respective bibliographical references to lines 33-38 after the new sentence:
NEW SENTENCE
"Developing exports according to a sustainable and reasonable growth model is seen as a solution to open the economy to take advantage of foreign capital and technology of developing countries. Therefore, research on factors that affect the export of firms is an interesting topic and has practical value. This topic not only attracts the interest of macroeconomic managers but also receives the attention of business managers. "
SENTENCE TO ADD
"The effects of exports, however, depend on the characteristics of the national economic system. In some cases, as shown for example by Gros (2013) and by Lucarelli, Andrini and Bianchi (2018) in the case of EMU countries, they can destabilise the macroeconomy."
References to add
Gros D. (2013), "Foreign Debt versus Domestic Debt in the Euro Area", Oxford Review of Economic Policy, 29 (3), pp. 502-517.
Lucarelli S., Andrini F.U. and Bianchi A. (2018), "Euro Depreciation and Trade Asymmetries between Germany and Italy versus the US: Industry-Level Estimates", Applied Economics, 50 (1), pp. 15-34.
Author Response
Dear Sir/Madam.
First, I would like to thank you for your time in our paper on behalf of the authors. We appreciate your comments and suggestions. At your suggestion, we have revised our manuscript. Specifically, we added the sentence, "The effects of exports, however, depend on the characteristics of the national economic system. In some cases, as shown, for example by Gros (2013) and by Lucarelli, Andrini, and Bianchi (2018), in the case of EMU countries, they can destabilize the macroeconomy." to lines 33 -38.
At the same time, we also add authors to the References section (the last line of the References section).
Once again, we would like to express our sincere gratitude to you. Your support and interest have given us a lot of motivation.
Best regards and Happy New Year!
Trang Phan
Author Response File: 
Author Response.pdf
