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The Review of Economics and Statistics Vol. 90 No. 3 2008

Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

Raymond Fisman1,2; Peter Moustakerski3; Shang‐Jin Wei2

1 National Bureau of Economic Research · 2 Columbia University · 3 Booz Allen Hamilton (United States)

open access

Abstract

Traditional explanations for indirect trade through an entrept 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 entrepts 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 entrept trade.

DOI
10.1162/rest.90.3.587
Volume
90
Issue
3
Pages
587-592
Language
en
Sources
semanticscholar openalex crossref

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