How does institutional quality affect firm performance? We examine the effect of various measures of institutions on firm productivity, using a rich micro level data on manufacturing enterprises in India drawn from the Enterprise Surveys of the World Bank. Our results suggest that bureaucratic corruption negatively influences firm productivity. In contrast, other institutional variables seem to have less influence on firm performance. This suggests that the focus of the Indian government needs to be redirected to address the corrupt practices at various levels rather than focusing just on improving the measures of doing business.
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