Corruption and Trade Protection: Evidence from Panel Data

Federal Reserve Bank of St. Louis Working Paper No. 2007-022A

24 Pages Posted: 25 May 2007

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Suryadipta Roy

Lawrence University - Economics

Date Written: May 2007

Abstract

This paper provides new estimates of the effects of corruption and poor institutions on trade protection. It exploits data on several measures of trade protection including import duty, international trade taxes, and the trade-GDP ratio. The paper complements the literature on the relationship between corruption and trade reform. It deviates from the previous literature in several ways. First, unobserved heterogeneity among countries have been controlled with properly specified fixed effects exploiting the time dimension present in the dataset. Secondly, instead of using tariff and non-tariff barriers, more general measures of trade protection have been used. The issue of endogeneity of corruption with respect to trade policy has been addressed using proper instruments for corruption used in previous studies. Moreover, two separate institutional measures have been used in the same regression to estimate their comparative impacts on trade policy. In general, we find that corruption and lack of contract enforcement have strong impacts to increase trade protection and negative effects on trade openness.

Keywords: Trade Protection, Corruption, Trade Reform, Contract Enforcement

JEL Classification: F13, O24

Suggested Citation

Bandyopadhyay, Subhayu and Roy, Suryadipta, Corruption and Trade Protection: Evidence from Panel Data (May 2007). Available at SSRN: https://ssrn.com/abstract=988433 or http://dx.doi.org/10.2139/ssrn.988433

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Suryadipta Roy

Lawrence University - Economics ( email )

Appleton, WI 54912
United States

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