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Journal of Economic Integration 2014 December;29(4) :759-782.
DOI: https://doi.org/10.11130/jei.2014.29.4.759
Corruption and Trade
Muhammad Tariq Majeed 
Quaid-i-Azam University, Islamabad, Pakistan
Corresponding Author: Muhammad Tariq Majeed ,Tel: +92 05190643020, Email: tariq@qau.edu.pk
Copyright ©2014 Journal of Economic Integration
ABSTRACT
Using a panel data set for 146 countries over the period 1984~2007, this study contributes in the area of trade-corruption linkages by highlighting the non-monotonic relationship between trade and corruption and significance of complementary policy reforms in shaping the link. Findings of the study suggest that trade increases corruption in a linear specification while its effect on corruption decreasing in a non-linear specification. The analysis exhibits that this non-linear nature of the relationship is worth noting and help answering the question why the literature on the relationship between trade and corruption is not conclusive. Furthermore, we make argument and find empirical support to our proposition that this is not just openness to trade that can reduce corruption but there are complimentary policy reforms that cause a decline in corruption. Findings of the study are robust to alternative specifications, econometric techniques, control of nonlinearity, control of interactive effects, and exclusion of outliers.

JEL Classification
C23: Models with Panel Data; Longitudinal Data; Spatial Time Series
D73: Bureaucracy; Administrative Processes in Public Organizations; Corruption
F14: Empirical Studies of Trade
K42: Illegal Behavior and the Enforcement of Law
H10: General
Keywords: Corruption | Law | Openness To Trade | Panel Data
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