Does Corruption Hinder Trade for the New EU Members?

Abstract

The paper uses a gravity trade model to examine the impact of corruption on bilateral trade using a data set comprising OECD economies, new EU members and developing nations. Although the level of corruption of both the importing and exporting nations does hinder cross-border transactions, differences between their ethical standards do have a negative impact on trade flows. The model is used to assess the impact on exports and imports of Romania and Bulgaria joining the European Union. Special

Exports and governance: Is the Middle East and North Africa region different?

“…More recently, Ali and Mdhillat (2015) confirm the negative effect of corrupt behaviour on international trade found by Horsewood and Voicu (2012) for Eastern European countries. They find that corruption hinders trade within the European Union, but it has a more pronounced impact in MENA countries.…”

“…Since international trade is also a potential contributor to macroeconomic outcomes, it is natural to think that the historically determined component of institutions should also have an effect on trade flows. This paper is closely related to the literature analysing the causal link between governance indicators and international trade (see Acemoglu & Yared, 2010;Anderson & Marcouiller, 2002;Berden et al, 2014;Bojnec et al, 2014;Dutt & Traca, 2010;Gylfason et al, 2015;Horsewood & Voicu, 2012;Levchenko, 2007;M arquez-Ramos, 2011;Milner & Mukherjee, 2009;Morrow, Siverson, & Tabares, 1998;Nunn & Trefler, 2014). Despite the fact that different methodological approaches have been used to test this relationship, in most cases the results indicate that governance affects trade flows.…”

“…The main results indicate that an exporter and an importer with a higher level of democracy are generally associated with higher bilateral trade, whereas only the exporters' level of institutional quality is associated with higher exports, when controlling for the level of democracy. Dutt and Traca (2010) and Horsewood and Voicu (2012) investigate the role of corruption on bilateral trade. These authors find that corruption hinders trade, although the difference between the ethical standards of the importing and exporting country has a negative impact on international transactions.…”

“…In addition, we also hypothesise that similarities in governance structures, in particular concerning regulatory quality, rule of law and the control of corruption, could also influence exports (Horsewood & Voicu, 2012;Levchenko, 2007); hence, similarity measures will be added as additional regressors in the gravity model.…”

The role of institutional quality on the performance in the export of coconut products

“…Institutional similarity reduces the adjustment costs that arise from dissimilar procedures and insecurities during bilateral trade (Linders, Slangen, de Groot, & Beugelsdijk, 2005). In addition, the nature of doing business in two countries could refer to ethical standards; if bribing officials is considered acceptable in two countries, then bribes might facilitate trade between both (Horsewood & Voicu, 2012).…”