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Corruption, trade costs, and gains from tariff liberalization: evidence from Southern Africa

Sequeira, Sandra (2016) Corruption, trade costs, and gains from tariff liberalization: evidence from Southern Africa. American Economic Review, 106 (10). pp. 3029-3063. ISSN 0002-8282

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Identification Number: 10.1257/aer.20150313

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.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Additional Information: © 2016 American Economic Association
Divisions: International Development
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy; Administrative Processes in Public Organizations; Corruption
F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
H - Public Economics > H8 - Miscellaneous Issues > H83 - Public Administration
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development; Role of International Organizations
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy; Factor Movement Policy; Foreign Exchange Policy
Sets: Departments > International Development
Date Deposited: 14 Nov 2016 17:16
Last Modified: 20 Jul 2019 02:20
Funders: International Growth Center, World Bank Group, The London School of Economics and Political Science
URI: http://eprints.lse.ac.uk/id/eprint/68286

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