Comparison of a country’s corruption level and delays in ports : a study of the effects corruption has on delays in ports

Abstract

The second-best theory of corruption includes predictions that corruption may be introduced as a second-best option in dealing with burdensome bureaucracy, leading to more efficiency. One of the predictions in the theory postulates that on average, paying for a better position in a queue (bribes) should be negatively correlated with time delays, meaning that paying bribes would reduce waiting time in a queue. Further, the theory on corruption predicts that the relationship between paying bribes and time delays should vary across companies, with those companies having the highest opportunity cost of waiting as well as lower costs of corruption being more willing to pay for a better position in the queue, and thereby shortening the waiting times. This master’s thesis examines the relationship between bribes and waiting times in ports and investigate the heterogeneity across firms depending on their home country’s corruption level. Our data are inconsistent with the prediction that corruption shortens waiting times. According to the specifications in this master’s thesis, all else equal, companies paying bribes in ports experience longer waiting times when exporting and/or importing. Further, our specifications indicate that the level of corruption in a company’s home country is in fact associated with shorter waiting times. The results in this master’s thesis are at odds with the second-best theory but do produce evidence that paying companies from more corrupt countries wait less than paying companies from less corrupt countries. This implies that companies from more corrupt home countries may possess a competitive advantage over companies from less corrupt home countries when encountering corruption in ports. Key words: International trade, Corruption, Time delays.