Trade Protection and Bureaucratic Corruption: An Empirical Investigation
INSEAD - Economics and Political Sciences
Canadian Journal of Economics, Vol. 42, Issue 1, pp. 155-183, February 2009
We examine whether protectionist trade policies lead to increased bureaucratic corruption. Using multiple measures of corruption and trade policies, we find strong evidence that corruption is significantly higher in countries with protectionist trade policies. These results are robust to endogeneity concerns. Next, a panel-data-based GMM methodology is used to estimate a dynamic model of corruption. This estimator controls for country-specific effects, potential endogeneity of trade policy, and existence of measurement errors afflicting the corruption data. The paper strengthens the case for trade liberalization and argues that trade reforms may lead to improvements in governance.
Number of Pages in PDF File: 29
JEL Classification: F13, D73
Date posted: January 20, 2009
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