Quantifying the effects of religious distance on trade misinvoicing

Abstract

ABSTRACT This study investigates the impact of religious distance on trade misinvoicing, using bilateral data from 87 countries over the period 1990–2018. Trade misinvoicing refers to the combined occurrence of export under-invoicing and import over-invoicing. Religiosity is utilized as a measure of personal trust in God and adherence to religious values and principles. To capture religiosity, a composite index is constructed, considering three components: the number of religious adherents, the significance of religion, and religious service attendance. The empirical findings reveal that countries with greater religious distance exhibit reduced trade misinvoicing. Within the three dimensions of religiosity, belief and the importance of religion act as deterrents to trade misinvoicing, while religious service attendance is found to facilitate such misinvoicing. Furthermore, the effects vary across different types of misinvoicing, time periods, and sectors.