Forensics, Elasticities and Benford's Law

52 Pages Posted: 21 Feb 2019

See all articles by Banu Demir

Banu Demir

Bilkent University; Centre for Economic Policy Research (CEPR)

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; European Bank for Reconstruction and Development (EBRD)

Date Written: 2018

Abstract

Estimates of the trade elasticity based on actual trade policy changes are scarce, and the few that exist are all over the place. This paper offers a setting where an exogenous increase in a border tax can be used to estimate the trade elasticity. It shows theoretically and empirically that if evasion of border taxes is not taken into account, the trade elasticity is estimated with a large downward bias, leading to miscalculation of gains from trade. The paper also contributes to the literature by proposing two new methods of detecting evasion of border taxes.

Keywords: trade elasticity, tax evasion, trade financing, border taxes, Benford's law

JEL Classification: F100

Suggested Citation

Demir, Banu and Smarzynska Javorcik, Beata, Forensics, Elasticities and Benford's Law (2018). CESifo Working Paper No. 7266, Available at SSRN: https://ssrn.com/abstract=3338591 or http://dx.doi.org/10.2139/ssrn.3338591

Banu Demir (Contact Author)

Bilkent University ( email )

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

European Bank for Reconstruction and Development (EBRD) ( email )

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