Corruption and Trade in General Equilibrium

30 Pages Posted: 22 Apr 2008

See all articles by Sugata Marjit

Sugata Marjit

Centre for Studies in Social Sciences, Calcutta; Indian Institute of Foreign Trade; City University of Hong Kong (CityU) - Department of Economics & Finance

Biswajit Mandal

Visva-Bharati University

Date Written: April 2008

Abstract

We use the HOSV model of trade to find out a link between corruption and the pattern of trade, not just its effect on the volume of trade. We prove that greater corruption in labor-abundant countries will restrict the volume of world trade while corrupt capital-abundant countries promote trade. This is caused by intermediaries who are engaged in mitigating the transaction cost of corruption. Relatively corrupt economy will export capital-intensive goods. However, relatively capital-abundant country will be worse off with increasing degree of corruption at home and abroad, whereas the labor-abundant country may gain from further corruption.

Keywords: Corruption, International Trade, Factor - intensity, General equilibrium

JEL Classification: O17, F1, D5

Suggested Citation

Marjit, Sugata and Marjit, Sugata and Mandal, Biswajit, Corruption and Trade in General Equilibrium (April 2008). Available at SSRN: https://ssrn.com/abstract=1123548 or http://dx.doi.org/10.2139/ssrn.1123548

Sugata Marjit (Contact Author)

Centre for Studies in Social Sciences, Calcutta ( email )

R 1, B.P. Township
Kolkata, West Bengal, India
Kolkata, West Bengal 700094
India

Indian Institute of Foreign Trade ( email )

New Delhi
QUTUB INSTITUTIONAL AREA
NEW DELHI, 110016
India

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Biswajit Mandal

Visva-Bharati University ( email )

Dept of Social Work
Sriniketan
Santiniketan 731235, West Bengal 731236
India