Corruption and Assortative Matching of Partners in International Trade

38 Pages Posted: 9 Aug 2022 Last revised: 3 Jul 2023

See all articles by Arusha Cooray

Arusha Cooray

James Cook University

Chandan Kumar Jha

Le Moyne College

Bibhudutta Panda

University of Minnesota - Morris - Division of Social Sciences

Date Written: August 1, 2022

Abstract

Although the effects of corruption on bilateral trade are well-documented, its impact on the composition of trading partners remains unexplored. In this paper, we argue that corruption in a country imposes asymmetric costs on its trading partners depending on their characteristics. Consequently, as the level of corruption in a country changes, its trade flows from some of its trading partners change more than others, depending on their characteristics, changing the composition of its trading partners. We focus on two characteristics of trading partners: (1) the level of corruption and (2) membership in the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention). Using the gravity model, we find evidence of a negative assortative matching in international trade with respect to corruption. We find that corruption in a country is negatively associated with trade flows from high-corrupt countries and is positively associated with trade volume from signatories of the OECD convention. Our results suggest that future studies on this topic should consider controlling for institutional dissimilarities between the trading partners as it has implications for bilateral trade costs.

Keywords: Corruption, International Trade, International Bribery, OECD Convention

JEL Classification: D73, F14, K20

Suggested Citation

Cooray, Arusha and Jha, Chandan Kumar and Panda, Bibhudutta, Corruption and Assortative Matching of Partners in International Trade (August 1, 2022). European Journal of Political Economy, Vol. 77, No. 102273, 2023, Available at SSRN: https://ssrn.com/abstract=4179688 or http://dx.doi.org/10.2139/ssrn.4179688

Arusha Cooray

James Cook University ( email )

Chandan Kumar Jha (Contact Author)

Le Moyne College ( email )

Syracuse, NY 13214
United States

Bibhudutta Panda

University of Minnesota - Morris - Division of Social Sciences ( email )

600 E 4th St
Morris, MN 56267
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
31
Abstract Views
233
PlumX Metrics