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Speed Money: Time, Corruption, and Trade

  • Shepherd, Ben

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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File URL: https://mpra.ub.uni-muenchen.de/17337/1/MPRA_paper_17337.pdf
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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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  1. Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  2. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
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  4. Daniel Kaufmann & Shang-Jin Wei, 1999. "Does "Grease Money" Speed Up the Wheels of Commerce?," NBER Working Papers 7093, National Bureau of Economic Research, Inc.
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  8. Pushan Dutt & Daniel Traca, . "Corruption and bilateral trade flows: extortion or evasion?," ULB Institutional Repository 2013/14172, ULB -- Universite Libre de Bruxelles.
  9. Campos, Nauro F & Giovannoni, Francesco, 2006. "Lobbying, Corruption and Political Influence," IZA Discussion Papers 2313, Institute for the Study of Labor (IZA).
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  11. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  12. Jakob Svensson, 2003. "Who Must Pay Bribes And How Much? Evidence From A Cross Section Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 207-230, February.
  13. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  14. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
  15. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
  16. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115, pages 200-249.
  17. Djankov, Simeon & Freund, Caroline & Pham, Cong S., 2006. "Trading on time," Policy Research Working Paper Series 3909, The World Bank.
  18. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
  19. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
  20. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April.
  21. Sequeira, Sandra & Djankov, Simeon, 2010. "An Empirical Study of Corruption in Ports," MPRA Paper 21791, University Library of Munich, Germany.
  22. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  23. Pushan Dutt, 2009. "Trade protection and bureaucratic corruption: an empirical investigation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 155-183, February.
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