Recent years have brought an increased awareness of the importance of trade costs in hindering trade, particularly in the developing world where these costs are highest. The most salient type of trade costs have often been tariff duties and costs associated with the physical transportation of goods. As a result, several countries embarked on extensive programmes of tariff liberalization and a significant portion of aid effort was channelled to investments in hard transport infrastructure, such as rebuilding railways and ports (the World Bank alone devotes more than 20 percent of its budget to transport infrastructure projects worldwide).
More recently, new light has been cast on the importance of a different type of trade cost: the cost imposed by the soft infrastructure of transport, defined as the bureaucratic infrastructure handling the movement of goods across borders. While there are many possible sources of inefficiencies stemming from the soft infrastructure of transport, recent research is beginning to document the role played by corruption in transport bureaucracies in driving trade costs. This article provides an overview of this research…
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