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Abstract

Using a gravity model framework this paper examines the effect of corruption on bi- lateral agricultural trade. This is the first cross-country study in the trade literature to examine the relationship between corruption and agricultural trade. The article uses five-year panel data from 2006 to 2010 and corrects for sample-selection bias. It also uses an instrumental variable approach for addressing endogeneity concerns. The study provides evidence that corruption can be trade-taxing when the protection level is low, but with the degree of protection higher than a threshold level, it becomes trade-enhancing. The results are robust for different measures of corruption.

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