Trade intensity,country size and corruption |
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Authors: | Stephen Knack Omar Azfar |
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Institution: | (1) World Bank, 1818 H St. NW, Washington DC 20433, USA (e-mail: Sknack@worldbank.org) , US;(2) IRIS Center of the University of Maryland, College Park, MD 20742, USA (e-mail: omar@iris.econ.umd.edu) , US |
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Abstract: | Abstract. Several authors claim to provide evidence that governmental corruption is less severe in countries where trade intensity
is higher or populations are smaller. We argue that theory is highly ambiguous on these questions, and demonstrate that empirical
links between corruption and trade intensity – or country size, strongly related to trade intensity – are sensitive to sample
selection bias. Most available corruption indicators provide ratings only for those countries in which multinational investors
have the greatest interest: these tend to include almost all large nations, but among small nations only those that are well-governed.
We find that the relationship between corruption and trade intensity disappears, using newer corruption indicators with substantially
increased country coverage. Similarly, the relationship between corruption and country size weakens or disappears using samples
less subject to selection bias.
Received: July 2001 / accepted: April 2002
We thank Anand Swamy and two anonymous referees for helpful comments and suggestions, Paul Schorosch for able research assistance,
and Ray Fisman, Roberta Gatti, Aart Kraay, and Shang-jin Wei for kindly providing data. The conclusions of this paper are
not intended to represent the views of the World Bank, its Executive Directors, or the countries they represent. |
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Keywords: | : corruption governance openness trade population |
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