Integrity for Hire : An Analysis of a Widespread Program for Combating Customs Corruption

Can governments successfully combat bureaucratic corruption by "hiring integrity" from the private sector? This paper examines the impact of hiring private firms to collect information for government anti-corruption efforts. In the past two decades, a number of developing countries have hired private firms to conduct preshipment inspections of imports, generating data that governments can use to fight corruption in customs agencies. I find that countries implementing such inspection programs subsequently experience large increases in import duty collections. By contrast, the growth rate of other tax revenues does not change appreciably. Additional evidence suggests that declines in customs corruption are behind the import duty improvements: the programs also lead to declines in undervaluation and in mis-reporting of goods classifications. Historically, this hired integrity appears to have been cost-effective: improvements in import duty collections in the first five years of a typical inspection program were 2.6 times program costs