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Smuggling, Camouflaging, and Market Structure

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Author Info
Richard A. Jensen
Jerry Thursby
Marie Thursby

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Abstract

We examine how market structure and enforcement affect smuggling and welfare in a model where smuggling is camouflaged by legal sales. Conditions are given for when some, but not necessarily all, firms smuggle. With camouflaging, the market price is below the price when all sales are legal, so smuggling improves welfare if the price effect outweighs excess smuggling cost. This welfare effect is directly related to the degree of competition. Increased enforcement in this model potentially reduces welfare. The model is shown to be consistent with evidence on cigarette smuggling in the United States for 1975-1982.

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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2630.

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Date of creation: Dec 1991
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Publication status: published as The Quarterly Journal of Economics, Vol. 106, No. 3, pp. 789-814, (August 1 991).
Handle: RePEc:nbr:nberwo:2630

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June. [Downloadable!] (restricted)
  2. Pitt, Mark M., 1981. "Smuggling and price disparity," Journal of International Economics, Elsevier, vol. 11(4), pages 447-458, November. [Downloadable!] (restricted)
  3. Gene M. Grossman & Carl Shapiro, 1988. "Foreign Counterfeiting of Status Goods," NBER Working Papers 1915, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February. [Downloadable!] (restricted)
  5. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August. [Downloadable!] (restricted)
  6. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October. [Downloadable!] (restricted)
  7. repec:fth:michin:230 is not listed on IDEAS
  8. Sheikh, Munir A., 1974. "Smuggling, production and welfare," Journal of International Economics, Elsevier, vol. 4(4), pages 355-364, November. [Downloadable!] (restricted)
  9. Deardorff, A.V. & Stolper, W.F., 1988. "Effects Of Smuggling Under African Conditions: A Factual, Institutional And Analytic Discussion," Working Papers 230, Research Seminar in International Economics, University of Michigan.
  10. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March. [Downloadable!] (restricted)
  11. Mari Pangestu, 1987. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 23(1), pages 1-39, April. [Downloadable!] (restricted)
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  1. de Melo, Jaime & Roland-Holst, David & Haddad, Mona, 1992. "Tax evasion and tax reform in a low income economy : general equilibrium estimates for Madagascar," Policy Research Working Paper Series 918, The World Bank. [Downloadable!]
  2. Marie C. Thursby & Jerry G. Thursby, 1994. "Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention," NBER Working Papers 4763, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Benjamin Alamar & Leila Mahmoud & Stanton Glantz, 2003. "Cigarette Smuggling in California: Fact and Fiction," University of California at San Francisco, Center for Tobacco Control Research and Education 1031, Center for Tobacco Control Research and Education, UC San Francisco. [Downloadable!]
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