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Smuggling Illegal versus Legal Goods across the U.S.‐Mexico Border: A Structural Equations Model Approach
Author(s) -
Buehn Andreas,
Eichler Stefan
Publication year - 2009
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/sej.2009.76.2.328
Subject(s) - tariff , international trade , tax evasion , accession , enforcement , evasion (ethics) , international economics , rules of origin , economics , business , political science , law , public economics , immune system , european union , immunology , biology
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.