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Integrity in Brief

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Firms operating in global markets often face systemic corruption issues, such as frequent demands for operational facilitation payments (“grease payments”), sometimes paired with extortion and shakedowns. Many anti-bribery regimes prohibit such payments and the OECD has decried the “corrosive effect of small facilitation payments, particularly on sustainable development and the rule of law.” However, any firm that sets an internal policy against such payments risks being snubbed by government officials in certain markets where facilitation payments are expected. Scholars call this a “collective action problem,” in which the incentives motivating individual firms or government agents toward selfish behavior are misaligned with the best policies for the whole sector.

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