When do anti-bribery laws affect international trade?

Abstract

This paper studies the relationship between anti-corruption enforcement and trade, offering a novel empirical perspective on the OECD Anti-Bribery Convention (ABC), in which signatory countries agreed to prosecute bribery of foreign officials. Existing literature on ABC focuses on its early years, claiming that it led OECD firms to avoid exporting to corrupt destinations, with the effect of diverting business away from developing countries. Yet these early years involved little actual enforcement, and I argue that the redirection of trade in this period owed not to the anti-bribery laws themselves, but to an underlying trend of increased political cooperation among OECD countries, as indicated by several factors including patterns in UN voting affinity. Only when enforcement of the laws intensifies, during the OECD’s Phase 3 initiative, do the laws begin having real effects, diverting OECD countries’ trade away from corrupt destinations.