[gov3009-l] Sequeira on the Efficiency Cost of Corruption

Dear Applied Statistics Workshop, The workshop will meet tomorrow, when Sandra Sequeira, a PhD candidate in public policy, will present her work on the efficiency cost of corruption, work that is joint with Simeon Djankov. Sandra provided the following abstract for her talk: This paper estimates the efficiency cost of corruption. We generate an original dataset on bribe payments at ports in Southern Africa that allows us to take an unusually close look into the black box of corruption, observing how bureaucrats set bribes and measuring their economic costs on firms and on the broader economy. 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. The Applied Statistics Workshop meets each Wednesday at 12 noon in K-354 CGIS-Knafel (1737 Cambridge St). The workshop begins with a light lunch and presentations usually start around 1215 and last until about 130 pm. Apologies for the late notice and I hope you'll be able to attend, Justin Grimmer