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Speed Money: Time, Corruption, and Trade

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  • Shepherd, Ben

Abstract

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.

Suggested Citation

  • Shepherd, Ben, 2009. "Speed Money: Time, Corruption, and Trade," MPRA Paper 17337, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17337
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    File URL: https://mpra.ub.uni-muenchen.de/17337/1/MPRA_paper_17337.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Shepherd, Ben, 2011. "Logistics costs and competitiveness: measurement and trade policy applications," MPRA Paper 38254, University Library of Munich, Germany.

    More about this item

    Keywords

    International trade; Trade policy; Economic Development; Political Economy; Corruption.;

    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
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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