Tariff evasion, the trade gap, and structural trade

Abstract

While it is well-recognized that there are differences in the trade values reported by exporters and importers, a literature has emerged linking this trade gap to tariff evasion. These efforts, however, lack a structural theoretic underpinning and limit their product-level investigations to a small number of countries. My first contribution is to provide a structural model of endogenous tariff evasion, one which then highlights the importance of both tariffs and border enforcement. My second contribution is to use a global, product-level dataset from 2002 to 2019, the analysis of which is consistent with my model’s predictions.