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

We assess the effects of the computerization of import transactions in Colombia, on both activity at ports and the performance of manufacturing firms. The reform was expected to increase efficiency and reduce corruption at ports. We rely on its staggered implementation for identification. We find that, as a result of computerization, reported import activity went up significantly in reformed ports compared to unreformed ones, with a consequent increase in tax collections. Almost 40% of increased imports are explained by a reduction in under-reporting in the Colombian port, while the rest reflects a true increase in imports and redirection that reveals a preference for reformed ports. Other signs of reduced corruption are increased predictability of clearance times and a reduction in the number of customs-related corruption cases prosecuted by the authorities. Increased imports are reflected in the activity of associated manufacturing firms. Sales expanded for importers by 5.2% and contracted by 3.9% for non-importers in the same municipality. These effects increase over time after the reform, and concentrate in medium sized firms, which appear to be the most affected by the non-tariff barriers of bureaucracy before the computerization