Trade Misinvoicing: The Dark Side of World Trade
Dresden University of Technology
Dresden University of Technology - Faculty of Economics and Business Management
The World Economy, Vol. 34, Issue 8, pp. 1263-1287, 2011
We analyse the determinants of trade misinvoicing using data on 86 countries from 1980 to 2005. In a simple microeconomic framework, we derive the determinants of four different types of trade misinvoicing taking into account that only the financial incentives determine whether and how much exports/imports to underinvoice or overinvoice, whereas the deterrents only affect the extent of misinvoicing. The hypothesised determinants are tested using data on discrepancies in bilateral trade with the United States. We find that the black market premia and tariffs motivate illegal trading activities. Higher financial penalties effectively act as a deterrent to this crime.
Number of Pages in PDF File: 25Accepted Paper Series
Date posted: August 25, 2011
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