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Offshoring and Corruption: Does Corruption Matter
KTH, School of Industrial Engineering and Management (ITM), Centres, Centre of Excellence for Science and Innovation Studies, CESIS.
2010 (English)Report (Other academic)
Abstract [en]

Corruption is often portrayed as a barrier to trade and investment capable of altering international investment patterns. Here, we analyze how firms’ choice of country and the volume of offshored material inputs are affected by corruption in target economies. Taking stance from the gravity model of trade, the analysis suggests that corruption is a deterrent for offshoring. Firms avoid corrupt countries and, given that destination country has been chosen it reduces the volume of offshored inputs. The negative impact of corruption is largest in poor countries, and internationalized firms trading with many countries use their flexibility to avoid corrupt countries. Given the importance of these firms as international investors, this is yet another reason for why fighting corruption is important.

Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2010. , 29 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 237
Keyword [en]
Corruption; Offshoring; Gravity; Firm level data
National Category
URN: urn:nbn:se:kth:diva-67446OAI: diva2:484951
QC 20120209Available from: 2012-02-09 Created: 2012-01-27 Last updated: 2012-03-20Bibliographically approved

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CESISWP237(615 kB)359 downloads
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Gustavsson Tingvall, Patrik
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