Differentiated Products and Evasion of Import Tariffs
Emerging literature has demonstrated some unique characteristics of trade in differentiated products. This paper contributes to the literature by postulating that differentiated products may be subject to greater tariff evasion due to the difficult...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/02/7351724/differentiated-products-evasion-import-tariffs http://hdl.handle.net/10986/7126 |
| Summary: | Emerging literature has demonstrated
some unique characteristics of trade in differentiated
products. This paper contributes to the literature by
postulating that differentiated products may be subject to
greater tariff evasion due to the difficulties associated
with assessing their quality and price. Using product-level
data on trade between Germany and 10 Eastern European
countries during 1992-2003, the authors find empirical
support for this hypothesis. They show that the trade gap,
defined as the discrepancy between the value of exports
reported by Germany and the value of imports from Germany
reported by the importing country, is positively related to
the level of tariff in 8 out of 10 countries. Further, the
authors show that the responsiveness of the trade gap to the
tariff level is greater for differentiated products than for
homogeneous goods. A one-percentage-point increase in the
tariff rate is associated with a 0.6 percent increase in the
trade gap in the case of homogeneous products and a 2.1
percent increase in the case of differentiated products.
Finally, the data indicate that greater tariff evasion
observed for differentiated products tends to take place
through misrepresentation of the import prices. |
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