Does Indonesia's High Level of Corruption Affect Its Trade Volume?
Abstract
This article aims to examine the connection between corruption and the amount of trade in several commodities, including raw materials, capital goods, intermediate products, and consumer goods, with a specific emphasis on the Indonesian situation. Indicators of corruption utilized in this article include the Corruption Perception Index (CPI) and the Control of Corruption (COC). Meanwhile, the sum of Indonesia's exports and imports indicated the country's trade volume. For this issue, this article employs the gravity model and regresses it with either a fixed effect or a random effect model. The empirical findings show that both the CPI and COC levels of corruption in Indonesia have a negative impact on the amount of trade in capital goods. However, only the CPI shows a negative correlation with the prevalence of corruption in Indonesia, whereas consumer products, intermediate goods, and raw materials all show a positive correlation. The impact of COC on Indonesia's trade partners is complicated for the commodities this article looked at. The insights generated from this study hold significant value in shaping a more informed and accurate representation of how corruption permeates and impacts international trade dynamics, thus contributing to a more nuanced understanding of this critical issue.
JEL Classification: D73, F10, C01
How to Cite:
Yunan, Z. Y. (2023). Does Indonesia’s High Level of Corruption Affects Its Trade Volume? Signifikan: Jurnal Ilmu Ekonomi, 12(2), 425-440. https://doi.org/10.15408/sjie.v12i2.35156.
Keywords
References
Abidin, I. S. Z., Haseeb, M., Chiat, L. W., & Rabiul Islam, M. (2016). Determinants of Malaysia – BRICS Trade Linkages: Gravity Model Approach. Investment Management and Financial Innovations, 13(2), 389–398. https://doi.org/10.21511/imfi.13(2-2).2016.14.
Ades, A., & di Tella, R. (1997). The New Economics of Corruption: A Survey and some New Results. Political Studies, 45(3), 496–515. https://doi.org/10.1111/1467-9248.00093.
Akbarian, R., & Shirazi, H. (2012). The Effect of Corruption on Trade Volume of Selected Countries in the Middle East and Latin America (2002-2008). Quarterly Journal of Quantitative Economics, 8(4), 31-49.
Alfada, A. (2019). The Destructive Effect of Corruption on Economic Growth in Indonesia: A Threshold Model. Heliyon, 5(10), e02649. https://doi.org/10.1016/j.heliyon. 2019.e02649.
Atsir, D. I., & Sunaryati, S. (2018). The Effect of Corruption on International Trade: A Case Study of Indonesian Trade to Nine Countries. Eko-Regional Jurnal Pengembangan Ekonomi Wilayah, 13(1), 19-26. https://doi.org/10.20884/1.erjpe.2018.13.1.1160.
Bahoo, S., Alon, I., & Floreani, J. (2022). Corruption, Foreign Aid, and International Trade. Thunderbird International Business Review, 64(2), 139–167. https://doi.org/10.1002/tie.22253.
Bojnec, Š., & Fertő, I. (2017). Quality Upgrades of EU Agri‐Food Exports. Journal of Agricultural Economics, 68(1), 269–279. https://doi.org/10.1111/1477-9552.12204.
Chi, T., & Kilduff, P. P. D. (2010). An Empirical Investigation of the Determinants and Shifting Patterns of US Apparel Imports Using a Gravity Model Framework. Journal of Fashion Marketing and Management: An International Journal, 14(3), 501–520. https://doi.org/10.1108/13612021011061915.
Choi, S.-G., & Lee, D.-S. (2019). Engel’s Law in the Commodity Composition of Exports. Scientific Reports, 9(1), 15871. https://doi.org/10.1038/s41598-019-52281-8.
Cooray, A. (2009). Government Expenditure, Governance and Economic Growth. Comparative Economic Studies, 51(3), 401–418. https://doi.org/10.1057/ces.2009.7.
De Jong, E., & Bogmans, C. (2011). Does Corruption Discourage International Trade? European Journal of Political Economy, 27(2), 385–398. https://doi.org/10.1016/j.ejpoleco.2010.11.005.
Dutt, P. (2009). Trade Protection and Bureaucratic Corruption: An Empirical Investigation. Canadian Journal of Economics/Revue Canadienne d’économique, 42(1), 155–183. https://doi.org/10.1111/j.1540-5982.2008.01503.x.
Dutta, N., & Kar, S. (2018). Relating Rule of Law and Budgetary Allocation for Tourism: Does Per Capita Income Growth Make a Difference for Indian States? Economic Modelling, 71, 263–271. https://doi.org/10.1016/j.econmod.2017.12.017.
Fitzgerald, D., & Haller, S. (2014). Exporters and Shocks: Dissecting the International Elasticity Puzzle. NBER Working Paper 19968. https://doi.org/10.3386/w19968.
Gil-Pareja, S., Llorca-Vivero, R., & Martínez-Serrano, J. A. (2019). Corruption and International Trade: a Comprehensive Analysis with Gravity. Applied Economic Analysis, 27(79), 3–20. https://doi.org/10.1108/AEA-06-2019-0003.
Hansen, C. P., Damnyag, L., Obiri, B. D., & Carlsen, K. (2012). Revisiting Illegal Logging and the size of the domestic timber market: the case of Ghana. International Forestry Review, 14(1), 39–49. https://doi.org/10.1505/146554812799973181.
Henderson, J. V., & Kuncoro, A. (2004). Corruption in Indonesia. NBER Working Paper 10674.
Huntington, S. P. (1968). Political Order in Changing Societies (7th ed.). Connecticut: Yale University Press.
Jayachandran, S. (2020). Social Norms as a Barrier to Women’s Employment in Developing Countries. IMF Economic Review, 69, 576-595.
Jun, S. (2022). A Study on Distance Effects of Intermediate and Household Consumption Goods. Korea Association for International Commerce and Information, 24(3), 313–335. https://doi.org/10.15798/kaici.2022.24.3.313.
Larch, M., Norbäck, P., Sirries, S., & Urban, D. M. (2016). Heterogeneous Firms, Globalisation and the Distance Puzzle. The World Economy, 39(9), 1307–1338. https://doi.org/10.1111/twec.12303
Leff, N. H. (1964). Economic Development Through Bureaucratic Corruption. The American Behavioral Scientist, 8(3), 8–14.
Lescuyer, G., Cerutti, P. O., Tshimpanga, P., Biloko, F., Adebu-Abdala, B., Tsanga, R., Yembe-Yembe, R. I., & Essiane-Mendoula, E. (2014). Policy Options for Improved Integration of Domestic Timber Markets under the Voluntary Partnership Agreement (VPA) Regime: Synthesis from Lessons Learned in Cameroon, the Democratic Republic of the Congo. CIFOR Working Paper. https://doi.org/10.17528/cifor/005079.
Linnemann, H. (1966). An Econometric Study of International Trade Flows. Amsterdam: North-Holland.
Mauro, P. (1995). Corruption and Growth. The Quarterly Journal of Economics, 110(3), 681–712.
Men, Y. (2022). Research on the Impact of Corruption on a Country’s Trade Flows — Based on the Extended Trade Gravity Model. Modern Economics & Management Forum, 3(2), 75. https://doi.org/10.32629/memf.v3i2.769.
Musila, J. W., & Sigué, S. P. (2010). Corruption and International Trade: An Empirical Investigation of African Countries. World Economy, 33(1), 129–146. https://doi.org/10.1111/j.1467-9701.2009.01208.x.
Olney, W. W. (2016). Impact of Corruption on Firm-Level Export Decisions. Economic Inquiry, 54(2), 1105–1127. https://doi.org/10.1111/ecin.12257.
Pastpipatkul, P., Boonyakunakorn, P., & Sriboonchitta, S. (2017). Gravity Model of Trade with Linear Quantile Mixed Models Approach. In. Kreinovich, V., Sriboonchitta, S., & Huynh, V. N. (Eds). Robustness in Econometrics, 692. Cham: Springer.
Prais, S. J. (1967). Reviewed Work: An Econometric Study of International Trade Flows by H. Linnemann. The American Economic Review, 57(1), 283–285.
Pujiati, A., Yanto, H., Dwi Handayani, B., Ridzuan, A. R., Borhan, H., & Shaari, M. S. (2023). The Detrimental Effects of Dirty Energy, Foreign Investment, and Corruption on Environmental Quality: New Evidence from Indonesia. Frontiers in Environmental Science, 10. https://doi.org/10.3389/fenvs.2022.1074172.
Ria, L. L., Elia, A., & Hukom, A. (2023). Analysis of the Influence of Exports, Imports, Foreign Investment and Labor on Indonesia’s GDP. Journal Magister Ilmu Ekonomi Universtas Palangka Raya : GROWTH, 8(2), 78–90.
Saputra, P. M. A. (2019). Corruption Perception and Bilateral Trade Flows: Evidence from Developed and Developing Countries. Journal of International Studies, 12(1), 65–78. https://doi.org/10.14254/2071-8330.2019/12-1/4.
Setiyono, B., & McLeod, R. H. (2010). Civil Society Organisations’ Contribution to the Anti-Corruption Movement in Indonesia. Bulletin of Indonesian Economic Studies, 46(3), 347–370. https://doi.org/10.1080/00074918.2010.522504.
Syukri, A. U., Hasanuddin, B., Paddu, A. H., & Suhab, S. (2022). Impact of Government Spending and Corruption on Foreign Direct Investment in Indonesia. Research Papers in Economics and Finance, 6(1), 34–45. https://doi.org/10.18559/ref.2022.1.3.
Thede, S., & Gustafson, N.-Å. (2012). The Multifaceted Impact of Corruption on International Trade. The World Economy, 35(5), 651–666. https://doi.org/10.1111/j.1467-9701.2012.01436.x.
Torres-Rojo, J. M. (2021). Illegal Logging and the Productivity Trap of Timber Production in Mexico. Forests, 12(7), 838-850. https://doi.org/10.3390/f12070838.
Treisman, D. (2007). What Have We Learned About the Causes of Corruption from Ten Years of Cross-National Empirical Research? Annual Review of Political Science, 10(1), 211–244. https://doi.org/10.1146/annurev.polisci.10.081205.095418.
Uslu, C. L. (2016). Cointegration and Causality between Turkish, Imports and GDP: A Structural Analysis. Eurasian Journal of Economics and Finance, 4(2), 91–100. https://doi.org/10.15604/ejef.2016.04.02.007.
Xiao, Y., Lenzen, M., Benoît‐Norris, C., Norris, G. A., Murray, J., & Malik, A. (2018). The Corruption Footprints of Nations. Journal of Industrial Ecology, 22(1), 68–78. https://doi.org/10.1111/jiec.12537.
DOI: 10.15408/sjie.v12i2.35156
Refbacks
- There are currently no refbacks.
