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Corruption and International Trade: A Comprehensive Analysis with Gravity

Salvador Gil-Pareja, Rafael Llorca-Vivero and José Antonio Martínez-Serrano
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Rafael Llorca-Vivero: Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).
José Antonio Martínez-Serrano: Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).

No 1705, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: The aim of this paper is to analyze the impact of corruption on trade. To this end, we estimate gravity equations using a wide sample of countries for a long period of time and three different measures of corruption: Corruption Perception Index (CPI), Control of Corruption Index (CCI) and a Structural Corruption Index (SCI). Our results show that perception-based indexes (CPI and CCI) give quite different results with respect to the Structural index (SCI) and that the detected impacts are somewhat sensitive to the formation of regional trade agreements or the level of per-capita income of the trade partners. In particular, when using the CCI index and there is at least one middle or low income country in the pair a positive effect of corruption on trade appears. Moreover, the negative impact of differences in the level of corruption detected with the SCI index appears to be much more relevant when the two countries are high income.

Keywords: Corruption; Gravity equation; Income level; International trade; Regional Trade Agreements (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-pol
Date: 2017-05
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ftp://147.156.210.157/RePEc/pdf/eec_1705.pdf First version, 2017 (application/pdf)

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