Smuggling, Camouflaging, and Market Structure
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.
|Date of creation:||Jun 1988|
|Publication status:||published as The Quarterly Journal of Economics, Vol. 106, No. 3, pp. 789-814, (August 1991).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- 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 148-155, February.
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- 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.
- repec:fth:michin:230 is not listed on IDEAS
- Pitt, Mark M., 1981. "Smuggling and price disparity," Journal of International Economics, Elsevier, vol. 11(4), pages 447-458, November.
- Gene M. Grossman & Carl Shapiro, 1986. "Foreign Counterfeiting of Status Goods," NBER Working Papers 1915, National Bureau of Economic Research, Inc.
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- Badi H. Baltagi & Rajeev K. Goel, 1987. "Quasi-Experimental Price Elasticities of Cigarette Demand and the Bootlegging Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 750-754.
- Gene M. Grossman & Carl Shapiro, 1988. "Foreign Counterfeiting of Status Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 79-100. Full references (including those not matched with items on IDEAS)
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