Topic:Trade Liberalization and Firms' Corruption Engagement:Theory and Evidence from China

Lecturer:Ge Song

Ge Song, Assistant professor at the School of Economics, Xiamen University, received his PhD in economics from the University of Colorado Boulder in 2023. His research interests include international trade, political economy, and empirical industrial organization.

Abstract:

This paper studies the role of trade liberalization in shaping domestic corruption. I develop a model of trade with heterogeneous firms that features endogenous corruption and export participation decisions. In the model, firms face a trade-off between engaging in corruption, thereby obtaining higher profits in the domestic market, or preserving their non-corrupt status in foreign markets to obtain higher export profits. In equilibrium, there is an inverted U-shaped relationship between firm productivity/size and corruption engagement. This prediction is confirmed in firm-level and aggregate data on international trade. I then calibrate the model to China and evaluate the extent to which trade policy is an effective tool or fighting domestic corruption. My findings suggest that (i) the share of firms that are "missing from trade" due to domestic corruption is 1%; (ii) conditional on the same reduction in the level of domestic corruption, trade liberalization is preferable to direct anti-corruption campaigns in terms of the associated gains in consumer welfare.

Time:10:00-12:00a.m,May 28th,2024

Venue:B336,Zhixin Building,Central Campus