Mind the Gap: Quantifying fraud on Swedish exports using bilateral trade asymmetries

Sammanfattning: Using open-source international trade statistics, we analyse cases where export country statistics do not match import country statistics for the same trade flow due to fraud. Specifically, we are interested in uncovering undervaluation fraud, whereby importers understate the value of their goods in order to pay lower taxes. Using a pooled cross-section approach, we confirm that previous findings about the salience of the tariff rate apply to Swedish exports. We then introduce covariates for government type and quality in countries which import Swedish goods. We find that both low democracy and high corruption contribute to higher incidence of undervaluation fraud, and that the duty rate effect is more pronounced in less democratic countries. To our knowledge, we are the first researchers to investigate this issue from the Swedish export perspective. We discuss the possible mechanisms behind these effects and present their full investigation as an avenue for further research.