Abnormal pricing in international commodity trading: Evidence from Ghana
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Date
2022
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Publisher
International Economics
Abstract
mispricing of international trade in natural resources contributes to significant tax base erosion
from developing countries but is difficult to measure using aggregate trade statistics. In this paper,
We apply a novel approach motivated by legal rules for trade and transfer, mispricing. to estimate.
abnormal pricing in gold and cocoa exports from Ghana, i.e., exports valued outside an assumed
arm's length price range that indicates fair market values. Using daily frequency, transaction-level
data from Ghana Customs, our results indicate abnormally undervalued exports of gold and cocoa
from Ghana equalled USD 8.8 billion in constant prices (base year 2011) or USD 4.1 billion in
current prices between 2011 and 2017. Approximately 11% of gold dorm exports and 1% of cocoa
bean exports, and 7.2% of cocoa paste exports appear abnormally undervalued. The implied
corporate tax base erosion equals USD 2.2 billion in constant prices (base year 2011), corresponding to an average annual decrease of 0.3% in Ghana's tax-to-GDP ratio.
Description
Research Article
Keywords
Trade mispricing, Illicit financial flows, Commodities