POC · The Political Organization of Corruption: State Restructuring and Its Consequences

Corruption distorts incentives, weakens public investment, and imposes heavy costs on firms and citizens. While sometimes seen as “greasing the wheels,” such effects are rare and short-lived; more often, officials create red tape to extract rents, sustaining self-reinforcing “bad equilibria.” Theory predicts that fragmented bureaucracies multiply bribes and uncertainty, while consolidation centralizes rents but can lower burdens on firms. Yet systematic evidence on how large-scale restructuring affects corruption remains scarce.Vietnam’s 2025 administrative overhaul provides an unprecedented natural experiment. The government is cutting provinces from 63 to 34, abolishing the district tier, and merging ministries from 30 to 22, eliminating nearly 80,000 positions. These reforms reshape veto points across sectors and alter citizens’ access costs, enabling causal identification via difference-in-differences. Two unique national surveys provide rich data: the Provincial Competitiveness Index of 8,000 domestic and 2,000 foreign firms, and the Public Administration Performance Index of 13,000–14,000 citizens annually, with more than a decade of pre-reform waves.This project leverages these conditions to assess both efficiency and equity. One paper examines how ministry mergers affect bribery burdens and firm outcomes; another studies how provincial consolidation shifts citizens’ bribe-paying, bargaining power, and reliance on intermediaries. Both also test heterogeneous effects across firm size, gender, and minority status. By combining quasi-experimental variation with high-quality microdata, the project will generate rigorous evidence on how centralization reshapes corruption and who gains from reform.