Can governments successfully combat bureaucratic corruption by “hiring integrity” from the private sector? This paper examines the impact of hiring private firms to collect information for government anti-corruption efforts. In the past two decades, a number of developing countries have hired private firms to conduct preshipment inspections of imports, generating data that governments can use to fight corruption in customs agencies. I find that countries implementing such inspection programs subsequently experience large increases in the growth rate of import duties, by 6 to 8 percentage points annually. By contrast, the growth rate of other tax revenues does not change appreciably. Additional evidence suggests that declines in customs corruption are behind the import duty improvements: the programs also lead to increases in imports (potentially reflecting lower bribe payments) and to declines in mis-reporting of goods classifications. Historically, this hired integrity appears to have been cost-effective: accumulated improvements in import duty collections in the fifth year of a typical inspection program were roughly 5 times accumulated costs.
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number
525.
Find related papers by JEL classification: D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Slemrod, Joel & Yitzhaki, Shlomo, 2002.
"Tax avoidance, evasion, and administration,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470
Elsevier.
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