Differentiated products and evasion of import tariffs
AbstractAn emerging literature has demonstrated some unique characteristics of trade in differentiated products. This paper contributes to the literature by postulating that differentiated products may be subject to greater tariff evasion due to the difficulties associated with assessing their quality and price. Using product-level data on trade between Germany and 10 Eastern European countries during 1992-2003, we find empirical support for this hypothesis. We show that the trade gap, defined as the discrepancy between the value of exports reported by Germany and the value of imports from Germany reported by the importing country, is positively related to the level of tariff in 8 out of 10 countries. Further, we show that the responsiveness of the trade gap to the tariff level is greater for differentiated products than for homogeneous goods. A one-percentage-point increase in the tariff rate is associated with a 0.4% increase in the trade gap in the case of homogeneous products and a 1.7% increase in the case of differentiated products. Finally, the data indicate that tariff evasion takes place through misrepresentation of the import prices rather than underreporting of quantities or product misclassification.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 76 (2008)
Issue (Month): 2 (December)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505552
International trade Differentiated products Tariff evasion Transition countries;
Other versions of this item:
- Narciso, Gaia & Smarzynska Javorcik, Beata, 2008. "Differentiated Products and Evasion of Import Tariffs," CEPR Discussion Papers 6804, C.E.P.R. Discussion Papers.
- Javorcik, Beata S. & Narciso, Gaia, 2007. "Differentiated products and evasion of import tariffs," Policy Research Working Paper Series 4123, The World Bank.
- F1 - International Economics - - Trade
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
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.:
- Pritchett, Lant & Sethi, Geeta, 1994.
"Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts,"
World Bank Economic Review,
World Bank Group, vol. 8(1), pages 1-16, January.
- Pritchett, Lant & Sethi, Geeta, 1993. "Tariff rates, tariff revenue, and tariff reform : some new facts," Policy Research Working Paper Series 1143, The World Bank.
- Jonathan S. Feinstein, 1991. "An Econometric Analysis of Income Tax Evasion and its Detection," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 14-35, Spring.
- Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
- Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
- Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2006.
"Transfer Pricing by U.S.-Based Multinational Firms,"
NBER Working Papers
12493, National Bureau of Economic Research, Inc.
- Andrew Bernard & J. Bradford Jensen & Peter Schott, 2008. "Transfer Pricing by U.S.-Based Multinational Firms," Working Papers 08-29, Center for Economic Studies, U.S. Census Bureau.
- James E. Rauch, 1996.
"Networks versus Markets in International Trade,"
NBER Working Papers
5617, National Bureau of Economic Research, Inc.
- James E. Rauch & Alessandra Casella, 2003.
"Overcoming Informational Barriers to International Resource Allocation: Prices and Ties,"
Royal Economic Society, vol. 113(484), pages 21-42, January.
- Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
- Joel Slemrod & Shlomo Yitzhaki, 2000.
"Tax Avoidance, Evasion, and Administration,"
NBER Working Papers
7473, National Bureau of Economic Research, Inc.
- James E. Anderson & J. Peter Neary, 2004.
"Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform,"
Boston College Working Papers in Economics
601, Boston College Department of Economics.
- Anderson, James E. & Neary, J. Peter, 2007. "Welfare versus market access: The implications of tariff structure for tariff reform," Journal of International Economics, Elsevier, vol. 71(1), pages 187-205, March.
- James E Anderson & J Peter Neary, 2004. "Welfare versus Market Access - The Implications of Tariff Structure for Tariff Reform," Working Papers 200423, School Of Economics, University College Dublin.
- Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2005.
"Assessing the impact of communication costs on international trade,"
Journal of International Economics,
Elsevier, vol. 67(2), pages 428-445, December.
- Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2002. "Assessing the impact of communication costs on international trade," Policy Research Working Paper Series 2929, The World Bank.
- Raymond Fisman & Shang-Jin Wei, 2004.
"Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 471-500, April.
- Fisman, Raymond & Wei, Shang-Jin, 2001. "Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China," CEPR Discussion Papers 3089, C.E.P.R. Discussion Papers.
- Raymond Fisman & Shang-Jin Wei, 2001. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," NBER Working Papers 8551, National Bureau of Economic Research, Inc.
- Arvind Panagariya & Dani Rodrik, 1991.
"Political-Economy Arguments for a Uniform Tariff,"
NBER Working Papers
3661, National Bureau of Economic Research, Inc.
- Carolyn L. Evans, 2003. "The Economic Significance of National Border Effects," American Economic Review, American Economic Association, vol. 93(4), pages 1291-1312, September.
- James E. Rauch & Vitor Trindade, 1999.
"Ethnic Chinese Networks in International Trade,"
NBER Working Papers
7189, National Bureau of Economic Research, Inc.
- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
- Antoine BOUET & Devesh ROY, 2009.
"Trade protection and tax evasion: evidence from Kenya, Mauritius and Nigeria,"
1, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jun 2009.
- Antoine Bou�t & Devesh Roy, 2012. "Trade protection and tax evasion: Evidence from Kenya, Mauritius, and Nigeria," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 21(2), pages 287-320, April.
- Nitsch, Volker, 2011. "Trade Mispricing and Illicit Flows," Darmstadt Discussion Papers in Economics 54540, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
- Rollo, Valentina, 2012. "Determinants of Tanzanian export prices," Policy Research Working Paper Series 6225, The World Bank.
- Prachi Mishra & Arvind Subramanian & Petia Topalova, 2007. "Policies, Enforcement, and Customs Evasion: Evidence from India," IMF Working Papers 07/60, International Monetary Fund.
- Helble, Matthias & Shepherd, Ben & Wilson, John S., 2007. "Transparency, trade costs, and regional integration in the Asia Pacific," Policy Research Working Paper Series 4401, The World Bank.
- Kazuki Onji, 2009. "A Tale of Pork Prices: Evasion and Attenuation of a Japanese Tariff," Asia Pacific Economic Papers 382, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
- Beata S. Javorcik & Shang-Jin Wei, 2009.
"Corruption and Cross-Border Investment in Emerging Markets: Firm-Level Evidence,"
062009, Hong Kong Institute for Monetary Research.
- Javorcik, Beata S. & Wei, Shang-Jin, 2009. "Corruption and cross-border investment in emerging markets: Firm-level evidence," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 605-624, June.
- Honorio Kume & Guida Piani & Pedro Miranda, 2010. "Tarifas De Importação E Evasão Fiscal No Brasil," Discussion Papers 1468, Instituto de Pesquisa Econômica Aplicada - IPEA.
- Mishra, Prachi & Subramanian, Arvind & Topalova, Petia, 2008. "Tariffs, enforcement, and customs evasion: Evidence from India," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1907-1925, October.
- Gupta, Pranav Kumar & Roy, Devesh & Ahmad, Kaikaus, 2012. "Close eye or closed eye: The case of export misinvoicing in Bangladesh," IFPRI discussion papers 1157, International Food Policy Research Institute (IFPRI).
- Ferrantino, Michael J. & Wang, Zhi, 2008. "Accounting for discrepancies in bilateral trade: The case of China, Hong Kong, and the United States," China Economic Review, Elsevier, vol. 19(3), pages 502-520, September.
- Hamanaka, Shintaro, 2011. "Utilizing the Multiple Mirror Technique to Assess the Quality of Cambodian Trade Statistics," Working Papers on Regional Economic Integration 88, Asian Development Bank.
- Sequeira, Sandra & Djankov, Simeon, 2010. "An Empirical Study of Corruption in Ports," MPRA Paper 21791, University Library of Munich, Germany.
- Bastos, Paulo & Silva, Joana, 2010. "Identifying vertically differentiated products," Economics Letters, Elsevier, vol. 106(1), pages 32-34, January.
- Pierre-Louis Vézina; Lorenzo Rotunno, 2010. "Chinese networks and tariff evasion," IHEID Working Papers 20-2010, Economics Section, The Graduate Institute of International Studies, revised Nov 2010.
- Kubo, Koji, 2012. "Trade policies and trade mis-reporting in Myanmar," IDE Discussion Papers 326, Institute of Developing Economies, Japan External Trade Organization(JETRO).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.