1 Hiding, Circumvention, Public Procurement and Shaping Laws: The Role of Networks and Bribery in Bulgaria 1 Todor Yalamov 2 ABSTRACT: The paper looks at corruption as a means to engage in non-compliant behavior. It argues that bribery is a substitute to being connected and statistically tests various forms of this proposition in the context of Bulgaria. This approach is tested with two unconditional non-compliant goals (hiding and circumvention) of economic behavior and two legitimate goals (influencing laws and public procurement), which might be achieved by non- compliant means. The findings suggest that bribery is used primarily when companies are engaged in hidden economic activities and circumvention of the law, while networks turn out to be the only significant variable when firms attempt to influence new legislation or acquire public procurement contracts. Non-compliant behavior of firms, defined as every behavior of the firm, which is in violation of existing (formal) regulations and procedures, have attracted significant interest among economists in recent years. Corruption itself is among the most prominent examples of non- compliant behavior, but it is also a proxy for the presence of other forms of non-compliance, namely being a tool to achieve certain goals circumventing some existing regulations. 1 I thank CERGE-EI Foundation for funding of the research and Ekaterina Rashkova, Edgar Feige, Edward Christie, Charles Hedges, Gergana Yankova, Ruslan Stefanov, and Alexander Stoyanov for providing valuable inputs on earlier versions of the paper. 2 Assistant Professor, Faculty of Economics and Business Administration, Sofia University “St. Kliment Ohridsky” and Senior Analyst, Economic Program, Center for the Study of Democracy, Bulgaria.