Trade Misinvoicing: Corruption and Economic Performance in Africa

<p dir="ltr">This paper analyses how trade misinvoicing, as a direct measure of corruption, affects the eco?nomic performance of Africa, given that most of the existing studies on the corruption-economy nexus are based on corruption perception index, world governance indicators, international coun?try risk guide, and other corruption indices. Using GMM and OLS econometric techniques on a sample of 35 African countries from 2008 to 2017, our results show that corruption, as measured by value gap reduces income per capita in the selected African countries. Specifically, a 1 percent increase in the value gap will reduce GDP per capita by 0.309-0.414 percent. The results also show that trade mispricing is positively associated with tariffs. Concerning the control variables, tariffs and external debts have a negative association with national income, as expected. This result survives a robustness check of partner-country trade data sourced from UN Comtrade, a sub-sample of the value gap, and using the CPI measure of corruption. The policy recommen?dation of this study is to strengthen the regulatory framework for the collection of tariffs and to close any gaps in the reporting of trade data in the selected African countries.</p>