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Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade Traditional explanations for indirect trade through an entrepôt 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 entrepôts 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 entrepôt trade. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economics and Statistics MIT Press

Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

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References (9)

Publisher
MIT Press
Copyright
Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
ISSN
0034-6535
eISSN
1530-9142
DOI
10.1162/rest.90.3.587
Publisher site
See Article on Publisher Site

Abstract

Traditional explanations for indirect trade through an entrepôt 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 entrepôts 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 entrepôt trade.

Journal

The Review of Economics and StatisticsMIT Press

Published: Aug 1, 2008

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