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Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines

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  • Dean Yang

    (University of Michigan)

Abstract

Increased enforcement can lead crime to be displaced to alternative lawbreaking methods. In theory, crime displacement should respond positively to the size of profits threatened by enforcement. If enforcement displaces crime towards lawbreaking methods with lower variable costs, the overall crime rate need not fall. This paper examines a customs reform in the Philippines that raised enforcement against a specific method of avoiding import duties. The reform constituted a quasi-experiment: the increased enforcement applied only to shipments from a subset of countries, so that corresponding shipments from all other countries serve as a comparison group. Increased enforcement reduced the targeted method of duty avoidance, but led to substantial displacement to an alternative duty-avoidance method (shipping via duty-exempt export processing zones), amounting to 2.7 percent of total imports from treatment countries. The hypothesis that the reform led to zero change in total duty avoidance cannot be rejected. Displacement was greater for products with higher tariff rates and import volumes, consistent with the existence of fixed costs of switching to alternative duty-avoidance methods.

Suggested Citation

  • Dean Yang, 2004. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," Working Papers 520, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:520
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    File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers501-525/r520.pdf
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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