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Tariffs, enforcement, and customs evasion: Evidence from India

  • Mishra, Prachi
  • Subramanian, Arvind
  • Topalova, Petia

We examine the effect of tariff policies on evasion of customs duties, in the context of the trade reform in India of the 1990s. By exploiting the variation in tariff rates across time and products, we identify a robust positive elasticity of evasion with respect to tariffs. A second contribution of the paper is to provide some evidence on the impact of enforcement. While we cannot identify the direct impact of enforcement on evasion, we can establish the extent to which enforcement-related factors, such as product characteristics that determine the ease of detection of evasion, affect the evasion elasticity. The results render support to the hypothesis that improvements in enforcement can reduce the responsiveness of evasion to tariffs.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 10-11 (October)
Pages: 1907-1925

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:1907-1925
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Slemrod, Joel, 1994. "Fixing the leak in Okun's bucket optimal tax progressivity when avoidance can be controlled," Journal of Public Economics, Elsevier, vol. 55(1), pages 41-51, September.
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  9. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610, Wisconsin Madison - Social Systems.
  10. Dean Yang, 2008. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 1-14, February.
  11. Slemrod, Joel & Kopczuk, Wojciech, 2002. "The optimal elasticity of taxable income," Journal of Public Economics, Elsevier, vol. 84(1), pages 91-112, April.
  12. Petia Topalova, 2004. "Trade Liberalization and Firm Productivity; The Case of India," IMF Working Papers 04/28, International Monetary Fund.
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