The costs of bureaucracy and corruption at customs: Evidence from the computerization of imports in Colombia

We assess the effects of the computerization of import transactions in Colombia on import volume, port efficiency and the performance of manufacturing firms. Staggered implementation allows us to identify the causal effects of the reform. We find that computerization triggered a significant increase in reported imports in reformed ports compared to nonreformed ones, along with a sizeable increase in tax collection. Our results indicate that a combination of factors underpin the increase in declared imports: an actual increase in firms’ imports, a reduction in import underreporting and a redirection of imports from nonreformed to reformed ports that reveals importers' preference for the latter. Other signs of reduced corruption include increased predictability of clearance times and a reduction in the number of customs-related corruption cases prosecuted by the authorities. Importantly, increased imports lead to better firm performance: in municipalities associated with treated customs, sales of manufacturing firms increased by 5.2% for importers and shrunk by 3.9% for nonimporters. These effects increase over time and are concentrated in small- to medium-sized firms, which appear to have been the most affected by the nontariff barriers before computerization.