International Trade and Corruption

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Does international trade increase or decrease corruption?

Challenging corruption has recently become one of the main priorities in a number of countries around the globe. Mainly because the negative effects of corruption have been widely recognized in practice and by the academics. The adverse effects of corruption vary; in developed countries corruption is relatively curbed; however in the underdeveloped world corruption usually accounts for enormous amount of the Gross National Product. There are a number of different approaches to fighting corruption as well as there are different causes of it. This essay paper argues openness to international trade has a positive effect in decreasing political corruption. Deriving from neoliberal ideas, international trade widens the scope of free market which results in less substantive powers for the government officials. Corruption flourishes when there is lack of perfect competition in the bureaucracy; monopoly power among officials is combined with discretional powers and low accountability. Another argument discussed in this paper favours the idea of reducing corruption by lowering tariff rates for international trade. An empirical study is being presented which analyses the correlation between corruption and import shares.
Transparency International accounts corruption as the abuse of the ones entrusted with power for private gain. Corruption negatively affects everyone whose life, livelihood or general happiness depends on the integrity of people in a position of authority. Corrupt activities hold back economic development, prevent the conditions free market and equal opportunities for businesses and consumers as well as exploits already marginalised groups of people. In some cases, s...

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Gatti, R. (2004). Explaining Corruption: Are Open Countries Less Corrupt? Journal of International Development. 16 (1).
Gerring, J. and Thacker, S. C. (2005). Do Neoliberal Policies Deter Political Corruption?. International Organization. 59 (1), 1.
Larrain, F. and Tavaranes, J. (2000). Can Openness Deter Corruption?. CEPR Discussion Pape. DP6488 . 1 (1), 1.
Mandal, B. and Marjit, S. (2013). Trade reform, intermediation and corruption. Economic Modelling. 33 (1), 1.
Haur Tang, S. (2011). Corruption and International Trade: An Empirical Study on Large East Asian Newly Industrializing Countries and Comparative Politics of Corruption. The UCLA Undergraduate Journal of Economics. 1 (1).

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