Risk management for second-hand clothing imports in least developed countries: Legislations and perception of public-sector corruption.

Abstract

The second-hand clothing imports are very popular in the least developed countries (LDCs). The social health risk (SHR) associated with second-hand clothing products and the lack of relevant legislations in LDCs, however, bring substantial challenges. This article is therefore developed to explore the sterilization legislation design for second-hand clothing supply chains in LDCs. To address LDCs' different import requirements of fumigation, both the extended exporter responsibility (EER) legislation scheme and the extended importer responsibility (EIR) legislation scheme are considered. We also examine whether the perception of public-sector corruption in LDCs may affect the performance of sterilization legislation schemes. We compare the performance of sterilization legislation schemes under different public-sector corruption cases, different sterilization legislation structures, as well as market competition. Interestingly, our analyses show that the EER and EIR legislation schemes can achieve the same performance under a per unit SHR duty, no matter whether there is public-sector corruption or not. However, these two legislation schemes perform differently under the lump-sum SHR duty. Besides, with the presence of the public-sector corruption perception, the prospect of financial benefits from bribing the regulatory agency can induce the firm to choose a higher optimal sterilization level when the bribe is sufficiently small. These implications complement the extant knowledge on risk management of second-hand clothing in LDCs, and provide an important guidance regarding the design of sterilization legislations on second-hand clothing imports.