IDEAS home Printed from https://ideas.repec.org/p/mie/wpaper/525.html
   My bibliography  Save this paper

Integrity for Hire: An Analysis of a Widespread Program for Combating Customs Corruption

Author

Listed:
  • Dean Yang

    (University of Michigan)

Abstract

Can governments successfully combat bureaucratic corruption by “hiring integrity” from the private sector? This paper examines the impact of hiring private firms to collect information for government anti-corruption efforts. In the past two decades, a number of developing countries have hired private firms to conduct preshipment inspections of imports, generating data that governments can use to fight corruption in customs agencies. I find that countries implementing such inspection programs subsequently experience large increases in the growth rate of import duties, by 6 to 8 percentage points annually. By contrast, the growth rate of other tax revenues does not change appreciably. Additional evidence suggests that declines in customs corruption are behind the import duty improvements: the programs also lead to increases in imports (potentially reflecting lower bribe payments) and to declines in mis-reporting of goods classifications. Historically, this hired integrity appears to have been cost-effective: accumulated improvements in import duty collections in the fifth year of a typical inspection program were roughly 5 times accumulated costs.

Suggested Citation

  • Dean Yang, 2005. "Integrity for Hire: An Analysis of a Widespread Program for Combating Customs Corruption," Working Papers 525, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:525
    as

    Download full text from publisher

    File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r525.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reinikka, Ritva & Svensson, Jakob, 2004. "The power of information : evidence from a newspaper campaign to reduce capture," Policy Research Working Paper Series 3239, The World Bank.
    2. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    3. Dean Yang, 2008. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 1-14, February.
    4. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
    5. Fjeldstad, Odd-Helge & Tungodden, Bertil, 2003. "Fiscal Corruption: A Vice or a Virtue?," World Development, Elsevier, vol. 31(8), pages 1459-1467, August.
    6. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
    7. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470, Elsevier.
    8. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    9. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    10. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April.
    11. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    12. Chand, Sheetal K. & Moene, Karl O., 1999. "Controlling Fiscal Corruption," World Development, Elsevier, vol. 27(7), pages 1129-1140, July.
    13. Mookherjee, Dilip & Png, I P L, 1992. "Monitoring vis-a-vis Investigation in Enforcement of Law," American Economic Review, American Economic Association, vol. 82(3), pages 556-565, June.
    14. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    15. Glenn Jenkins, 1992. "Economic Reform And Institutional Innovation," Development Discussion Papers 1992-04, JDI Executive Programs.
    16. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-292, April.
    17. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 679-705.
    18. Klepper, Steven & Nagin, Daniel, 1989. "The Anatomy of Tax Evasion," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 5(1), pages 1-24, Spring.
    19. Hines, James R. (ed.), 2001. "International Taxation and Multinational Activity," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226341736, October.
    20. De Wulf, Luc, 1981. "Statistical analysis of under- and overinvoicing of imports," Journal of Development Economics, Elsevier, vol. 8(3), pages 303-323, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jakob Svensson, 2006. "Osiem pytań na temat korupcji," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 77-106.
    2. Jennifer Hunt, 2007. "Bribery In Health Care In Peru And Uganda," Departmental Working Papers 2007-02, McGill University, Department of Economics.
    3. Grégoire ROTA-GRAZIOSI & Anne-Marie GEOURJON & Vianney DEQUIEDT, 2009. "Contrats Incitatifs et Réforme des Douanes dans les PED : une Application des Modèles d’Agence Hiérarchique," Working Papers 200906, CERDI.
    4. Claudio Ferraz & Frederico Finan, 2008. "Exposing Corrupt Politicians: The Effects of Brazil's Publicly Released Audits on Electoral Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 703-745.
    5. Jeffrey B. Nugent, 2014. "Detecting Corruption And Evaluating Programs To Control It: Some Lessons For Mena," World Scientific Book Chapters, in: Ishac Diwan (ed.), UNDERSTANDING THE POLITICAL ECONOMY OF THE ARAB UPRISINGS, chapter 7, pages 131-163, World Scientific Publishing Co. Pte. Ltd..
    6. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    7. Kaufmann, Daniel & Bellver, Ana, 2005. "Transparenting Transparency: Intial Empirics and Policy Applications," MPRA Paper 8188, University Library of Munich, Germany.
    8. Brian Levy, 2007. "Governance Reform : Bridging Monitoring and Action," World Bank Publications - Books, The World Bank Group, number 6742, December.
    9. Michael, Bryane & Popov, Maja, 2012. "Do Customs Trade Facilitation Programmes Help Reduce Customs-Related Corruption?," EconStor Preprints 109021, ZBW - Leibniz Information Centre for Economics.
    10. International Finance Corporation & Multilateral Investment Guarantee Agency & World Bank, 2009. "A Handbook for Tax Simplification," World Bank Publications - Reports 28206, The World Bank Group.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dean Yang, 2008. "Integrity for Hire: An Analysis of a Widespread Customs Reform," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 25-57, February.
    2. Nicolas Jacquemet, 2005. "La corruption comme une imbrication de contrats : Une revue de la littérature microéconomique," Working Papers 2005-29, Center for Research in Economics and Statistics.
    3. Dean Yang, 2008. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 1-14, February.
    4. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115, pages 200-249.
    5. Auriol, Emmanuelle & Straub, Stéphane & Flochel, Thomas, 2016. "Public Procurement and Rent-Seeking: The Case of Paraguay," World Development, Elsevier, vol. 77(C), pages 395-407.
    6. Fang, Hanming & Gu, Quanlin & Zhou, Li-An, 2019. "The gradients of power: Evidence from the Chinese housing market," Journal of Public Economics, Elsevier, vol. 176(C), pages 32-52.
    7. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    8. Krisztina Kis-Katos & Günther G. Schulze, 2013. "Corruption in Southeast Asia: a survey of recent research," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(1), pages 79-109, May.
    9. Jakob Svensson, 2006. "Osiem pytań na temat korupcji," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 77-106.
    10. Bernard Gauthier & Jonathan Goyette, 2016. "Fiscal policy and corruption," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 57-79, January.
    11. Drugov, Mikhail, 2010. "Competition in bureaucracy and corruption," Journal of Development Economics, Elsevier, vol. 92(2), pages 107-114, July.
    12. Abhijit Banerjee & Rema Hanna, 2012. "Corruption [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
      • Banerjee, Abhijit & Hanna, Rema & Mullainathan, Sendhil, 2012. "Corruption," Working Paper Series rwp12-023, Harvard University, John F. Kennedy School of Government.
      • Hanna, Rema N. & Mullainathan, Sendhil & Banerjee, Abhijit, 2012. "Corruption," Scholarly Articles 8830779, Harvard Kennedy School of Government.
      • Abhijit Banerjee & Rema Hanna & Sendhil Mullainathan, 2012. "Corruption," Working Papers id:4952, eSocialSciences.
      • Abhijit Banerjee & Sendhil Mullainathan & Rema Hanna, 2012. "Corruption," NBER Working Papers 17968, National Bureau of Economic Research, Inc.
    13. Cooter Robert D. & Garoupa Nuno, 2014. "A Disruption Mechanism for Bribes," Review of Law & Economics, De Gruyter, vol. 10(3), pages 1-23, November.
    14. Roberto Burguet & Juan-José Ganuza & José García-Montalvo, 2016. "The Microeconomics of Corruption. A Review of Thirty Years of Research," Working Papers 908, Barcelona School of Economics.
    15. Blackburn, Keith & Bose, Niloy & Emranul Haque, M., 2006. "The incidence and persistence of corruption in economic development," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2447-2467, December.
    16. Olken, Benjamin A., 2009. "Corruption perceptions vs. corruption reality," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 950-964, August.
    17. Olivier Armantier & Amadou Boly, 2008. "Can Corruption Be Studied in the Lab? Comparing a Field and a Lab Experiment," CIRANO Working Papers 2008s-26, CIRANO.
    18. Reinikka, Ritva & Svensson, Jakob, 2006. "Using Micro-Surveys to Measure and Explain Corruption," World Development, Elsevier, vol. 34(2), pages 359-370, February.
    19. Antonio Acconcia & Marcello D'Amato & Riccardo Martina, 2003. "Corruption and Tax Evasion with Competitive Bribes," CSEF Working Papers 112, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    20. Hunt, Jennifer & Laszlo, Sonia, 2012. "Is Bribery Really Regressive? Bribery’s Costs, Benefits, and Mechanisms," World Development, Elsevier, vol. 40(2), pages 355-372.

    More about this item

    Keywords

    corruption; crime; bribery; enforcement; tax evasion; customs;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mie:wpaper:525. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: FSPP Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/riumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.