Working Paper: CEPR ID: DP6078
Authors: Raymond Fisman; Peter Moustakerski; Shangjin Wei
Abstract: Traditional explanations for indirect trade through an entrepôt have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepôts may 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, even though there is no legal tax advantage to sending goods via Hong Kong SAR. We undertake a number of extensions to rule out plausible alternative hypotheses based on existing explanations for entrepôt trade.
Keywords: corruption; middleman; tax evasion
JEL Codes: F1; H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Chinese tariff rate (F19) | intensity of indirect exports through Hong Kong SAR (F10) |
| Chinese tariff rate (F19) | indirect trade (F10) |