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Trade protection and bureaucratic corruption: an empirical investigation

Author: Dutt, Pushan INSEAD Area: Economics and Political ScienceIn: Canadian Journal of Economics, vol. 42, no. 1, February 2009 Language: EnglishDescription: p. 155-183.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: This paper examines whether protectionist policies on the part of the government leads to increased corruption on part of the bureaucracy. Using multiple measures of corruption and trade policies, we find strong evidence suggesting that corruption is significantly higher in countries with activist trade policies. The cross-country results are checked for robustness to endogeneity concerns. Next, a panel-data based GMM methodology is used to estimate a dynamic model of corruption. This estimator controls for unobserved country-specific effects, the potential endogeneity of trade policy and other variables, and the existence of measurement errors afflicting the corruption data. The paper strengthens the case for trade liberalization and argues that trade reforms are a means to undertake improvements in governance
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This paper examines whether protectionist policies on the part of the government leads to increased corruption on part of the bureaucracy. Using multiple measures of corruption and trade policies, we find strong evidence suggesting that corruption is significantly higher in countries with activist trade policies. The cross-country results are checked for robustness to endogeneity concerns. Next, a panel-data based GMM methodology is used to estimate a dynamic model of corruption. This estimator controls for unobserved country-specific effects, the potential endogeneity of trade policy and other variables, and the existence of measurement errors afflicting the corruption data. The paper strengthens the case for trade liberalization and argues that trade reforms are a means to undertake improvements in governance

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