TY - JOUR
T1 - Corruption and bilateral trade flows
T2 - extortion or evasion?
AU - Dutt, Pushan
AU - Traça, Daniel
PY - 2010/11/1
Y1 - 2010/11/1
N2 - We analyze the impact of corruption on bilateral trade, highlighting its dual role in terms of extortion and evasion. Corruption taxes trade, when corrupt customs officials in the importing country extort bribes from exporters (extortion effect); however, with high tariffs, corruption may be trade enhancing when corrupt officials allow exporters to evade tariff barriers (evasion effect). We derive and estimate a corruption-augmented gravity model, where the effect of corruption on trade flows is ambiguous and contingent on tariffs. Empirically, corruption taxes trade in the majority of cases, but in high-tariff environments (covering 5%to 14% of the observations) their marginal effect is trade enhancing.
AB - We analyze the impact of corruption on bilateral trade, highlighting its dual role in terms of extortion and evasion. Corruption taxes trade, when corrupt customs officials in the importing country extort bribes from exporters (extortion effect); however, with high tariffs, corruption may be trade enhancing when corrupt officials allow exporters to evade tariff barriers (evasion effect). We derive and estimate a corruption-augmented gravity model, where the effect of corruption on trade flows is ambiguous and contingent on tariffs. Empirically, corruption taxes trade in the majority of cases, but in high-tariff environments (covering 5%to 14% of the observations) their marginal effect is trade enhancing.
UR - http://www.scopus.com/inward/record.url?scp=78650967523&partnerID=8YFLogxK
U2 - 10.1162/REST_a_00034
DO - 10.1162/REST_a_00034
M3 - Article
AN - SCOPUS:78650967523
SN - 0034-6535
VL - 92
SP - 843
EP - 860
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 4
ER -