The OECD Anti-Bribery Convention: Changing the Currents of Trade

Abstract

This paper examines the effects of a watershed anti-corruption initiative –the 1997 OECD Anti-Bribery Convention– on international trade flows. I exploit variation in the timing of implementation by exporters and in the level of corruption of importers to quantify the Convention’s effects on bilateral exports. Using a large panel of country pairs to control for confounding global and national trends and shocks, I find that, on average, the Convention caused a reduction in exports from signatory countries to high corruption importers relative to low corruption importers. This suggests that by creating large penalties for foreign bribery, the Convention indirectly increased transaction costs between signatory countries and high corruption importers. I also find evidence that the Convention’s effects differed across product categories.