We thank Richard Baldwin, Nicolas Berman, Marco Fugazza, Marcelo Olarreaga, Ben Shepherd, Zheng Wang, the editor and two anonymous reviewers for very helpful comments as well as seminar participants at the Paris School of Economics, PEGGED workshop 2011, ITSG 2011 at the University of Milan, GEP Postgraduate Conference at Nottingham University and RIEF 2011 at the University of Nice for helpful discussions. This research was supported by SNSF subsidy PDAMP1-123125.
Article first published online: 30 SEP 2012
© 2012 Blackwell Publishing Ltd.
The World Economy
Special Issue: GLOBAL TRADE POLICY 2012 Edited by DAVID GREENAWAY
Volume 35, Issue 12, pages 1772–1794, December 2012
How to Cite
Rotunno, L. and Vézina, P.-L. (2012), Chinese Networks and Tariff Evasion. World Economy, 35: 1772–1794. doi: 10.1111/j.1467-9701.2012.01452.x
- Issue published online: 21 DEC 2012
- Article first published online: 30 SEP 2012
Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. This paper shows they also play a role in import-tariff evasion. As illegal trade activities occur outside the law, market information is scant and formal contract enforcement institutions are non-existent. This renders networks the more important for the matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts. In this paper, we find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, that is, the tariff semi-elasticity of China’s missing trade.