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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Andreas Buehn & Stefan Eichler, 2009. "Smuggling Illegal versus Legal Goods across the U.S.-Mexico Border: A Structural Equations Model Approach," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 328-350, October.
  • Handle: RePEc:sej:ancoec:v:76:2:y:2009:p:328-350
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    File URL: http://dx.doi.org/10.4284/sej.2009.76.2.328
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    Cited by:

    1. Alexandra Rudolph & Friedrich Schneider, 2017. "International Human Trafficking: Measuring Clandestinity by the Structural Equation Approach," Social Inclusion, Cogitatio Press, vol. 5(2), pages 39-58.
    2. Buehn, Andreas & Farzanegan, Mohammad Reza, 2013. "Hold your breath: A new index of air pollution," Energy Economics, Elsevier, vol. 37(C), pages 104-113.
    3. Schneider, Friedrich & Buehn, Andreas, 2012. "Shadow Economies in Highly Developed OECD Countries: What Are the Driving Forces?," IZA Discussion Papers 6891, Institute for the Study of Labor (IZA).
    4. A. Bühn & M.R. Farzanega, 2011. "Hold Your Breath: A New Index of Air Quality," Working Papers 11-24, Utrecht School of Economics.
    5. Dominik Maltritz & Andreas Buehn & Stefan Eichler, 2011. "Modeling country default risk as a latent variable: a Multiple Indicators Multiple Causes (MIMIC) approach," Post-Print hal-00730230, HAL.
    6. Andreas Buehn & Mohammad Reza Farzanegan, 2012. "Smuggling around the world: evidence from a structural equation model," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3047-3064, August.

    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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