Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2009:13:
The Multifaceted Impact of Corruption on International Trade

Susanna Thede () and Nils-Åke Gustafson

Abstract: The purpose of this paper is to perform a detailed examination of corruption effects on trade based on corruption characteristics known to affect economic exchange within the corruption research field. These characteristics are the level, prevalence, customs location, function and predictability of corruption. The multifaceted corruption impact on trade is empirically examined using a corruption-augmented gravity equation. The equation is estimated using a Heckman version of a GMM instrumental variable method. Our results provide strong evidence of that import flows vary systematically with the investigated corruption characteristics and enable the identification of channels through which corruption affects international trade. The empirical investigation clearly indicates the need to examine the multifaceted role of corruption to properly assess the trade effects of corruption.

Keywords: Bilateral trade; Corruption; GMM Estimations; (follow links to similar papers)

JEL-Codes: D73; F10; K40; (follow links to similar papers)

18 pages, October 7, 2009

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This paper is forthcoming as:
Thede, Susanna and Nils-Åke Gustafson, 'The Multifaceted Impact of Corruption on International Trade', World Economy.

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