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Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods

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Author Info
Robert C. Feenstra
Gordon H. Hanson

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Abstract

In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong traders distribute a large fraction of China's exports. Net of customs, insurance, and freight charges, re-exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re-exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, and products sent to China for further processing. These results are consistent with the view that traders resolve informational problems in exchange. Additional results suggest that traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong. Copyright 2004 Blackwell Publishing, 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK..

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 13 (2004)
Issue (Month): 1 (03)
Pages: 3-35
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Handle: RePEc:bla:jemstr:v:13:y:2004:i:1:p:3-35

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    Other versions:
  2. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
    Other versions:
  3. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December. [Downloadable!] (restricted)
  4. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  5. Spulber, Daniel F, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Blackwell Publishing, vol. 63(4), pages 559-80, October. [Downloadable!] (restricted)
  6. Townsend, Robert M, 1978. "Intermediation with Costly Bilateral Exchange," Review of Economic Studies, Blackwell Publishing, vol. 45(3), pages 417-25, October. [Downloadable!] (restricted)
  7. Rubinstein, Ariel & Wolinsky, Asher, 1987. "Middlemen," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 581-93, August. [Downloadable!] (restricted)
  8. Wan, Henry Y, Jr & Weisman, Jason, 1999. "Hong Kong: The Fragile Economy of Middlemen," Review of International Economics, Blackwell Publishing, vol. 7(3), pages 410-30, August.
  9. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer. [Downloadable!] (restricted)
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  11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
  12. Gary Biglaiser & James W. Friedman, 1999. "Adverse Selection with Competitive Inspection," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(1), pages 1-32, 03. [Downloadable!] (restricted)
  13. Robert C. Feenstra et al., 1999. "Discrepancies in International Data: An Application to China-Hong Kong Entrepot Trade," American Economic Review, American Economic Association, vol. 89(2), pages 338-343, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lee Branstetter, 2006. "China's Embrace of Globalisation," Working Papers id:640, esocialsciences.com. [Downloadable!]
  2. Bruce Blonigen & Alyson Ma, 2007. "Please Pass the Catch-up The Relative Performance of Chinese and Foreign Firms in Chinese Exports," NBER Working Papers 13376, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Robert C. Feenstra & Gordon H. Hanson & Songhua Lin, 2002. "The Value of Information in International Trade: Gains to Outsourcing through Hong Kong," NBER Working Papers 9328, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Raymond Fisman & Peter Moustakerski & Shang-Jin Wei, 2007. "Outsourcing Tariff Evasion: A New Explanation for Entrepot Trade," NBER Working Papers 12818, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Horst Raff & Nicolas Schmitt, 2008. "Buyer Power in International Markets," Kiel Working Papers 1431, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  6. Deborah Swenson, 2005. "Outsourcing Price Decisions: Evidence from U.S. 9802 Imports," NBER Working Papers 11184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Paganetto Luigi & Becchetti Leonardo, 2001. "Globalizzazione,Rivoluzione Tecnologica E Commercio Internazionale: Le Nuove Sfide," Departmental Working Papers 153, Tor Vergata University, CEIS. [Downloadable!]
  10. Masahiro Endoh & Koichi Hamada & Koji Shimomura, 2008. "Can a Preferential Trade Agreement Benefit Neighbor Countries without Compensating Them?," Working Papers 961, Economic Growth Center, Yale University. [Downloadable!]
  11. Sebastián Claro, 2005. "How Uncompetitive is the State-Owned Industrial Sector in China," Documentos de Trabajo 305, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  12. Philipp J. H. Schröder & Harald Trabold & Parvati Trübswetter, 2003. "Intermediation in Foreign Trade: When Do Exporters Rely on Intermediaries?," Discussion Papers of DIW Berlin 336, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  13. Haddad, Mona, 2007. "Trade integration in East Asia : the Role of China and production networks," Policy Research Working Paper Series 4160, The World Bank. [Downloadable!]
  14. Toru Kikuchi, 2008. "Footloose Capital and the Locational Advantage of a Hub," Economics Bulletin, Economics Bulletin, vol. 6(43), pages 1-9. [Downloadable!]
  15. Albert Park & Dean Yang & Xinzheng Shi & Yuan Jiang, 2006. "Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis," Working Papers 549, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  16. Chad Bown & Meredith Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series WP-04-28, Federal Reserve Bank of Chicago. [Downloadable!]
  17. Pranab Bardhan, 2009. "Middlemen Margins and Globalization," Working Papers id:2202, esocialsciences.com. [Downloadable!]
  18. Chang-Tai Hsieh & Keong T. Woo, 2005. "The Impact of Outsourcing to China on Hong Kong's Labor Market," American Economic Review, American Economic Association, vol. 95(5), pages 1673-1687, December. [Downloadable!]
  19. Hendrik P. van Dalen & Aico P. van Vuuren, 2003. "Greasing the Wheels of Trade," Tinbergen Institute Discussion Papers 03-066/1, Tinbergen Institute. [Downloadable!]
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