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Smuggling Illegal versus Legal Goods across the U.S.-Mexico Border: A Structural Equations Model Approach

Listed author(s):
  • Andreas Buehn


    (Faculty of Business and Economics, Technische Universitaet Dresden, 01062 Dresden, Germany)

  • Stefan Eichler


    (Faculty of Business and Economics, Technische Universitaet Dresden, 01062 Dresden, Germany)

We study the smuggling of illegal and legal goods across the U.S.-Mexico border from 1975 to 2004. Using a Multiple Indicators Multiple Causes (MIMIC) model we test the microeconomic determinants of both smuggling types and reveal their trends. We find that illegal goods smuggling decreased from $116 billion in 1984 to $27 billion in 2004 as a result of improved labor market conditions in Mexico and intensified U.S. border enforcement. Smuggling legal goods is motivated by tax and tariff evasion. While export misinvoicing fluctuated at low levels, import misinvoicing switched from underinvoicing to overinvoicing after Mexico’s accession to the GATT and the North American Free Trade Agreement (NAFTA) induced lower tariffs.

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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2009)
Issue (Month): 2 (October)
Pages: 328-350

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Handle: RePEc:sej:ancoec:v:76:2:y:2009:p:328-350
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