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Outsourcing Tariff Evasion: A New Explanation for Entrep�t Trade

  • Raymond Fisman

    (Graduate School of Business, Columbia University)

  • Peter Moustakerski

    (Booz Allen Hamilton)

  • Shang-Jin Wei

    (Graduate School of Business, Columbia University)

Traditional explanations for indirect trade through an entrep�t focus on savings in transport costs and the role of specialized agents in processing and distribution. We provide an alternative perspective based on the potential for entrep�ts to facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, despite the absence of any legal tax advantage to sending goods via Hong Kong SAR. We present several robustness tests to rule out plausible alternative hypotheses based on existing explanations for entrep�t trade. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/rest.90.3.587
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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 3 (August)
Pages: 587-592

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Handle: RePEc:tpr:restat:v:90:y:2008:i:3:p:587-592
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  1. 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.
  2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  3. Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc.
  4. Robert C. Feenstra & Gordon H. Hanson, 2004. "Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 3-35, 03.
  5. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  6. Andriamananjara, Soamiely & Arce, Hugh M. & Ferrantino, Michael J., 2004. "Transshipment in the United States," Working Papers 15871, United States International Trade Commission, Office of Economics.
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