A Political-Economic Analysis of Firm's Rent-Seeking: An Empirical Study of Lobby and Bribe in Different Countries

The aim of this paper is to study the relationship between the lobby and bribeand behavior analysis and firms selection. So, to test this theory and determine the relation between lobbying and bribing, the data of more than twenty six thousand firms from 45 countries reported by The World Bank Enterprise Survey (2002-2005) are used. Because of the interaction between lobby and bribe, and, that lobby is a zero-one dummy variable, a combination of simultaneous equations estimation method and Probit regressions are used. As a main result, it is shown that, although lobby substitutes the bribery, but this relationship is not symmetric. 3 groups of variables including countrywide characteristics, industrial and firm-level factors affect the choice between lobbying and bribing. Lobby decreases bribery, but the substitution is not complete so that half of the lobbying firms still use bribery as a mean to cover the risk of lobbying failure. Higher lobbying winning chance or firm’s affordability to accept the risk of failure through for example external financing decreases the need to bribe to insure the risk of lobbying failure and, thus, make the substitution stronger.