Outsourcing Tariff Evasion: A New Explanation for Entrep�t Trade
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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Volume (Year): 90 (2008)
Issue (Month): 3 (August)
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