TY  - JOUR
AU  - Wei,Shang-Jin
TI  - Natural Openness and Good Government
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7765
PY  - 2000
Y2  - June 2000
UR  - http://www.nber.org/papers/w7765
L1  - http://www.nber.org/papers/w7765.pdf
N1  - Author contact info:
Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - This paper offers a new interpretation of the connection between openness and good governance.  Assuming that corruption and bad governance drive out international trade and investment more than domestic trade and investment, a  naturally more open economy' as determined by its size and geography   would devote more resources to building good institutions and would display lower corruption in equilibrium.  In data,  naturally more open economies' do exhibit less corruption even after taking into account their levels of development.   Residual openness'   which potentially includes trade policies   is found not to be important once  natural openness' is accounted for.  Moreover, naturally more open economies' also tend to pay better civil servant salaries relative to their private sector alternatives indicative of the marginal benefit of good governance in a society's revealed preference.  These patterns are consistent with the conceptual model.
ER  -