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

Author

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  • 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
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    File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r525.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    2. Jennifer Hunt, 2007. "Bribery in Health Care in Peru and Uganda," NBER Working Papers 13034, National Bureau of Economic Research, Inc.
    3. 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.
    4. 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.
    5. Kaufmann, Daniel & Bellver, Ana, 2005. "Transparenting Transparency: Intial Empirics and Policy Applications," MPRA Paper 8188, University Library of Munich, Germany.
    6. Brian Levy, 2007. "Governance Reform : Bridging Monitoring and Action," World Bank Publications, The World Bank, number 6742, July.
    7. Michael, Bryane & Popov, Maja, 2012. "Do Customs Trade Facilitation Programmes Help Reduce Customs-Related Corruption?," EconStor Preprints 109021, ZBW - German National Library of Economics.
    8. Jeffrey B. Nugent, 2014. "Detecting Corruption And Evaluating Programs To Control It: Some Lessons For Mena," World Scientific Book Chapters,in: UNDERSTANDING THE POLITICAL ECONOMY OF THE ARAB UPRISINGS, chapter 7, pages 131-163 World Scientific Publishing Co. Pte. Ltd..
    9. International Finance Corporation & Multilateral Investment Guarantee Agency & World Bank, 2009. "A Handbook for Tax Simplification," World Bank Other Operational Studies 28206, The World Bank.

    More about this item

    Keywords

    corruption; crime; bribery; enforcement; tax evasion; customs;

    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

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