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Speed Money: Time, Corruption, and Trade

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  • Shepherd, Ben

Abstract

This paper shows that longer trade times are associated with higher levels of trade-related corruption, consistent with a theoretical framework in which “fast” producers earn higher profits than “slow” ones, but may have to pay “speed money” to possibly corrupt customs officials. This finding is robust to the use of corruption measures based on perceptions and reported behavior, the inclusion of a wide range of control variables from the previous literature, and estimation by a variety of methods including instrumental variables. Moreover, results from a gravity model show that the combination of slow border procedures and rampant corruption acts as a significant drag on international trade, in line with the model's predictions: the elasticity of bilateral trade with respect to trade time is around 5% stronger in a country with rampant corruption compared with a corruption free country. Together, these results suggest that improved trade facilitation can be an effective and feasible policy for reducing corruption over the short-term in weak institutional environments.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17337.

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Date of creation: 16 Sep 2009
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Handle: RePEc:pra:mprapa:17337

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Keywords: International trade; Trade policy; Economic Development; Political Economy; Corruption.;

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References

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  1. Nauro F. Campos & Francesco Giovannoni, 2006. "Lobbying, Corruption and Political Influence," CEDI Discussion Paper Series 06-14, Centre for Economic Development and Institutions(CEDI), Brunel University.
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  15. Sequeira, Sandra & Djankov, Simeon, 2010. "An Empirical Study of Corruption in Ports," MPRA Paper 21791, University Library of Munich, Germany.
  16. Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  17. Carolyn L. Evans & James Harrigan, 2003. "Distance, Time, and Specialization," NBER Working Papers 9729, National Bureau of Economic Research, Inc.
  18. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
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Cited by:
  1. Shepherd, Ben, 2011. "Logistics costs and competitiveness: measurement and trade policy applications," MPRA Paper 38254, University Library of Munich, Germany.

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