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Trade Misinvoicing: What can we measure?

Author

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  • Suranjali Tandon
  • R. Kavita Rao

Abstract

The existing studies on trade misinvoicing have focussed on the discrepancy in reported trade statistics between developing and developed countries. The estimates based on such methods rely on the assumption that developed countries report their trade statistics correctly. This paper provides evidence that trade misinvoicing between developed countries is in fact large and any estimate based on such method may not provide an accurate representation of the dimensions of trade misinvoicing in the world. Further, there is need to develop a methodology by which one can attribute the misinvoicing to one or the other trade partner. To address this problem, the paper offers an alternative methodology. Since the exports of a country are necessarily imports of another country which uses domestic factors to predict the export and import misinvoicing for a sample of large misinvoicers for the period 1990 to 2014. Such estimates allow us to establish whether the discrepancy can be attributed to the export or the import side for all countries. The paper finds that the domestic factors better explain the export side, therefore, allowing us to estimate illicit flows through trade misinvocing using the export misinvoicing by all countries.

Suggested Citation

  • Suranjali Tandon & R. Kavita Rao, 2017. "Trade Misinvoicing: What can we measure?," Working Papers id:12152, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:12152
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    References listed on IDEAS

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    1. Derek Kellenberg & Arik Levinson, 2019. "Misreporting trade: Tariff evasion, corruption, and auditing standards," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 106-129, February.
    2. Ila Patnaik & Abhijit Sen Gupta & Ajay Shah, 2012. "Determinants of Trade Misinvoicing," Open Economies Review, Springer, vol. 23(5), pages 891-910, November.
    3. Andrés Fernández & Michael W Klein & Alessandro Rebucci & Martin Schindler & Martín Uribe, 2016. "Capital Control Measures: A New Dataset," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 548-574, August.
    4. Pitt, Mark M., 1981. "Smuggling and price disparity," Journal of International Economics, Elsevier, vol. 11(4), pages 447-458, November.
    5. Andrés Fernández & Michael W Klein & Alessandro Rebucci & Martin Schindler & Martín Uribe, 2016. "Capital Control Measures: A New Dataset," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 548-574, August.
    6. James Boyce & Léonce Ndikumana, 2008. "New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options," Working Papers wp166, Political Economy Research Institute, University of Massachusetts at Amherst.
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