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Speed Money: Time, Corruption, and Trade

Listed author(s):
  • 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
Handle: RePEc:pra:mprapa:17337
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  21. Djankov, Simeon & Freund, Caroline & Pham, Cong S., 2006. "Trading on time," Policy Research Working Paper Series 3909, The World Bank.
  22. 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.
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  24. Kunicov , Jana & Rose-Ackerman, Susan, 2005. "Electoral Rules and Constitutional Structures as Constraints on Corruption," British Journal of Political Science, Cambridge University Press, vol. 35(04), pages 573-606, October.
  25. Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers 00/64, International Monetary Fund.
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