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Ports and Bribes

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From a new paper by Simeon Djankov and Sandra Sequiera (pdf here):

…We find that bribes are product-specific, frequent and substantial. Bribes can represent up to a 14% increase in total shipping costs for a standard 20ft container and a 600% increase in the monthly salary of a port official. Bribes are paid primarily to evade tariffs, protect cargo on the docks and avoid costly storage. We further identify three systemic effects associated with this type of corruption: a “diversion effect” where firms go the long way around to avoid the most corrupt port; a “revenue effect” as bribes reduce overall tariff revenue; and a “congestion effect” as the re-routing of firms increases congestion and transport costs by causing imbalanced cargo flows in the transport network. The evidence supports the theory that bribe payments at ports represent a significant distortionary tax on trade, as opposed to just a transfer between shippers and port officials that greases slow-moving clearing queues.

ht to Justin Grimmer

Written by Niall

April 12, 2009 at 11:24 am