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Do customs and other trade regulatory barriers lead firms to bribe? Evidence from Asia

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  • Nandika Sanath Kumanayake

Abstract

Corruption has become a big issue in the international trade environment with the increasing number of non-tariff barriers. The cost of corruption in customs administrations around the world has been estimated to be at least USD 2 billion. When stringent regulations become barriers to firms, they sometimes bribe government officials to get things done. Using firm-level data covering 11 Asian countries, this study sets out to quantify the impact of customs and other trade regulatory barriers on the firms’ decision to bribe. Endogenous treatment model has been accommodated to address possible endogeneity problems usually inherited in this kind of observational data. Results provide that in Asia, firms which experience difficulties with customs and other trade regulatory constraints are likely to pay more bribe amounting to 6.4% of their annual total sales than other firms. Enterprises which trust the fair functioning of their judiciary systems and enterprises with high productivity levels are less likely to bribe government officials to get things done. It is, therefore, necessary to implement policies to eliminate administrative inefficiencies especially in customs and minimize trade regulatory constraints to control trade-related corrupt practices.

Suggested Citation

  • Nandika Sanath Kumanayake, 2022. "Do customs and other trade regulatory barriers lead firms to bribe? Evidence from Asia," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(3), pages 340-357, April.
    • Handle: RePEc:taf:jitecd:v:31:y:2022:i:3:p:340-357
    DOI: 10.1080/09638199.2021.1962391
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    Cited by:

    1. Nandika Sanath Kumanayake & Ajantha Sisira Kumara & Asankha Pallegedara, 2023. "The nexus between public sector corruption and private sector efficiency: Evidence from worldwide firm‐level data," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1056-1077, May.

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