Working Paper: NBER ID: w12818
Authors: Raymond Fisman; Peter Moustakerski; Shangjin Wei
Abstract: Traditional explanations for indirect trade through an entrepot 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 entrepots 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 entrepot trade.
Keywords: tariff evasion; entrepot trade; indirect trade; Hong Kong; China
JEL Codes: F1; O10; O17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff rate (E43) | Indirect export rate (F14) |
| Tariff rate (E43) | Indirect trade intensity (F14) |
| Indirect export rate (F14) | Indirect trade intensity (F14) |