Is Corruption Detrimental to Trade?

Abstract

Many regard corruption to be detrimental to international trade. Some, however, think that corruption greases commerce in case of low-quality institutions. Others argue that arbitrary corruption is more damaging to trade than predictable corruption. This is the first paper to test these hypotheses empirically with trade-related measures of corruption. It finds that in general, corruption is detrimental to international trade. However, bribe paying may be beneficial in countries with very long waiting-times at the border or low-quality customs. Moreover, the nature of corruption matters: more uncertainty in advance about the bribe to be paid reduces trade.