Corruption, Trade Costs, and Gains from Tariff Liberalization: Evidence from Southern Africa
American Economic Review · 2016 · Volume 106 · Issue 10
Abstract
This paper exploits quasi-experimental variation in tariffs in southern Africa to estimate trade elasticities. Traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate. Trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities. In contexts of pervasive corruption, even small bribes can significantly reduce tariffs, making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms' import behavior. The tariff liberalization scheme is, however, still associated with improved incentives to accurately report quantities of imported goods, and with a significant reduction in bribe transfers from importers to public officials.
Keywords
Firm Behavior: Empirical Analysis, Bureaucracy, Administrative Processes in Public Organizations, Corruption, Trade Policy, International Trade Organizations, Public Administration, Public Sector Accounting and Audits, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements, International Linkages to Development, Role of International Organizations, Development Planning and Policy: Trade Policy, Factor Movement, Foreign Exchange Policy
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