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Chinese networks and tariff evasion

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Abstract

In this paper we combine the tariff evasion analysis of Fisman and Wei (2004) with Rauch and Trindade’s (2002) study of Chinese trade networks. Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. As tariff evasion occurs outside the law, market information is scant and formal institutions inexistent, rendering networks the more important. We find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, i.e. the tariff semi-elasticity of Chinese missing imports. We suggest the effects takes place through matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts.

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Bibliographic Info

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 20-2010.

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Length: 7733 words
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:gii:giihei:heidwp20-2010

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Keywords: tariff evasion; China; illicit trade; migrant networks;

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References

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  1. Raymond Fisman & Peter Moustakerski & Shang-Jin Wei, 2008. "Outsourcing Tariff Evasion: A New Explanation for Entrep�t Trade," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 587-592, August.
  2. Berger, Helge & Nitsch, Volker, 2008. "Gotcha!: a profile of smuggling in international trade," Discussion Papers 2008/6, Free University Berlin, School of Business & Economics.
  3. Javorcik, Beata S. & Narciso, Gaia, 2007. "Differentiated products and evasion of import tariffs," Policy Research Working Paper Series 4123, The World Bank.
  4. 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.
  5. Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc.
  6. Raymond Fisman & Shang-Jin Wei, 2009. "The Smuggling of Art, and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques," American Economic Journal: Applied Economics, American Economic Association, vol. 1(3), pages 82-96, July.
  7. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers id:2557, eSocialSciences.
  8. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  9. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  10. Anson Jose & Cadot Olivier & Olarreaga Marcelo, 2006. "Tariff Evasion and Customs Corruption: Does Pre-Shipment Inspection Help?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-26, December.
  11. Dean Yang, 2004. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," Working Papers 520, Research Seminar in International Economics, University of Michigan.
  12. Douglas Marcouiller, S.J., 2000. "Hijacking, Hold-Up, and International Trade," Boston College Working Papers in Economics 477, Boston College Department of Economics.
  13. Sébastien Jean & Cristina Mitaritonna, 2010. "Determinants and Pervasiveness of the Evasion of Customs Duties," Working Papers 2010-26, CEPII research center.
  14. James A. Dunlevy, 2006. "The Influence of Corruption and Language on the Protrade Effect of Immigrants: Evidence from the American States," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 182-186, February.
  15. 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.
  16. Levin, Jörgen & Widell, Lars, 2007. "Tax Evasion in Kenya and Tanzania:Evidence from Missing Imports," Working Papers 2007:8, Örebro University, School of Business.
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Cited by:
  1. Luca De Benedictis & Silvia Nenci & Gianluca Santoni & Lucia Tajoli & Claudio Vicarelli, 2013. "Network Analysis of World Trade using the BACI-CEPII dataset," Working Papers 2013-24, CEPII research center.
  2. Ferrantino, Michael J. & Liu, Xuepeng & Wang, Zhi, 2012. "Evasion behaviors of exporters and importers: Evidence from the U.S.–China trade data discrepancy," Journal of International Economics, Elsevier, vol. 86(1), pages 141-157.

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