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Corruption and Trade in General Equilibrium

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  • Sugata Marjit
  • Biswajit Mandal

Abstract

We use the HOSV model of trade to find out a link between corruption and the pattern of trade, not just its effect on the volume of trade. We prove that greater corruption in labor-abundant countries will restrict the volume of world trade while corrupt capital-abundant countries promote trade. This is caused by intermediaries who are engaged in mitigating the transaction cost of corruption. Relatively corrupt economy will export capital-intensive goods. However, relatively capital-abundant country will be worse off with increasing degree of corruption at home and abroad, whereas the labor-abundant country may gain from further corruption.

Suggested Citation

  • Sugata Marjit & Biswajit Mandal, "undated". "Corruption and Trade in General Equilibrium," Discussion Papers 08/15, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:08/15
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    File URL: http://www.nottingham.ac.uk/gep/documents/papers/2008/08-15.pdf
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    References listed on IDEAS

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    3. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
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    5. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    6. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    7. Hillman, Arye L. & Ursprung, Heinrich W., 1996. "The political economy of trade liberalization in the transition," European Economic Review, Elsevier, vol. 40(3-5), pages 783-794, April.
    8. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-745, September.
    9. Jansen, Marion & Nordås, Hildegunn Kyvik, 2004. "Institutions, trade policy and trade flows," WTO Staff Working Papers ERSD-2004-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    10. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-781, August.
    11. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
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    Cited by:

    1. Mandal, Biswajit, 2009. "Would Recession Induce More Intermediation in the Corrupt Informal Sector?," MPRA Paper 19930, University Library of Munich, Germany, revised 10 Jan 2010.

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