The Costs of Bureaucracy and Corruption at Customs: Evidence from the Computerization of Imports in Colombia

Customs face a difficult tradeoff between, on one side, collecting tariff revenues and preventing smuggling, the other avoiding creating additional barriers to trade. They also tend concentrate discretionary power in hands of officials whose decisions can bear high costs for firms, room rent extraction. In this context, information technologies limit direct interactions, reduce transaction allow local businesses better take benefits international We assess effects computerization import transactions plants’ growth Colombia. The reform occurred sequentially different customs between 2000 2005, allowing us use triple-difference strategy, comparing change outcome variables plants that were importing before beginning reform, firms not (less likely be affected by changes at customs). find imports led an increase 6 log points firms’ value added along with consequent increases employment, productivity tax collection. However, it generated winners (importing firms) losers (non-importing firms). Our investigation channels reveals reduction corruption judiciary cases treated customs, as well time clear its unpredictability. results support growing evidence potential proper improve efficiency tackle public administration important consequences economy.