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Chinese Networks and Tariff Evasion

  • Lorenzo Rotunno
  • Pierre-Louis Vézina

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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Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 12 (December)
Pages: 1772-1794

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Handle: RePEc:bla:worlde:v:35:y:2012:i:12:p:1772-1794
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  1. 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.
  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 & Narciso, Gaia, 2008. "Differentiated Products and Evasion of Import Tariffs," CEPR Discussion Papers 6804, C.E.P.R. Discussion Papers.
  4. 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.
  5. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers id:2557, eSocialSciences.
  6. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
  7. 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.
  8. Sébastien Jean & Cristina Mitaritonna, 2010. "Determinants and Pervasiveness of the Evasion of Customs Duties," Working Papers 2010-26, CEPII research center.
  9. Fisman, Raymond & Moustakerski, Peter & Wei, Shang-Jin, 2007. "Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade," CEPR Discussion Papers 6078, C.E.P.R. Discussion Papers.
  10. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  11. 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.
  12. 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.
  13. Levin, Jörgen & Widell, Lars M., 2014. "Tax evasion in Kenya and Tanzania: Evidence from missing imports," Economic Modelling, Elsevier, vol. 39(C), pages 151-162.
  14. 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.
  15. Douglas Marcouiller, S.J., 2000. "Hijacking, Hold-Up, and International Trade," Boston College Working Papers in Economics 477, Boston College Department of Economics.
  16. 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.
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