Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229338
Authors: 
Cooray, Arusha
Jha, Chandan Kumar
Panda, Bibhudutta
Year of Publication: 
2020
Series/Report no.: 
WIDER Working Paper No. 2020/114
Abstract: 
While the effects of corruption on bilateral trade have been relatively well explored, its effect on the composition of trading partners has not been studied. In this paper, we argue that corruption in a country is likely to impose asymmetric costs on its trading partners depending on their characteristics. As a result, as the level of corruption in a country changes, its trade flows from some of its trading partners change more than others depending on the latter's characteristics, causing a change in the composition of its trading partners. We focus on two characteristics of trading partners: the level of corruption and membership in the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Using the gravity model, we find evidence of negative assortative matching in international trade with respect to corruption: that corruption in a country is negatively associated with trade flows from highly corrupt countries and positively associated with trade flows from signatories to the Convention. Our main results also confirm the findings of previous studies that both origin and destination country corruption discourage bilateral trade.
Subjects: 
corruption
international bribery
international trade
OECD Convention
JEL: 
D73
F14
K20
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-871-9
Document Type: 
Working Paper

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