Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

Shang-Jin Wei, Raymond Fisman and Peter Moustakerski

No 6078, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Traditional explanations for indirect trade through an entrepôt have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepôts may facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, even though there is no legal tax advantage to sending goods via Hong Kong SAR. We undertake a number of extensions to rule out plausible alternative hypotheses based on existing explanations for entrepôt trade.

Keywords: Corruption; Middleman; Tax evasion (search for similar items in EconPapers)
JEL-codes: F1 H2 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-int and nep-pbe
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Citations: View citations in EconPapers (2)

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