Since governments started to collect revenue through imports and export tariffs, and to ban goods, smuggling has been a controversial. Governments oppose smuggling because they lose a significant amount of revenue, they cannot manipulate markets to favor domestic producers, and they cannot prohibit the consumption of goods that they deem immoral. Many citizens see direct benefits from smuggling. It gives citizens access to a larger bundle of goods and it moves the domestic market equilibrium quantity and price closer to the free trade equilibrium. Smuggling has adverse effects on society as it facilitates the growth of corruption, undermine can the rule law, and fund illegal crime syndicates. Depending on the different magnitudes of these
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When explaining why people choose to smuggle, I will draw from the work of Gary Becker and his model of rational choice theory for crime. When trying to understand the effects of smuggling in Mercantilism, I will build of the work of Peter Andreas(2013) who asserts that smuggling was necessary for America to prosper, Senior (1828) who thinks smuggling rectifies bad laws, and James(1961) who tries to quantify smuggling in 18th century Ireland. For modern markets, I will build off the work of Thursby, Jensen, and Thursby ( 1991), and Bhagwati and Hansen ( 1973) who both explore the effect of smuggling under different market …show more content…
Simply put. When the potential cost of smuggling goes up, the amount of smuggling goes down(Beuhn and Eichler 329; Becker 21). As the odds of getting caught increase, the expected value of each good decreases because the smugglers will face legal action if they get caught, so fewer goods are smuggled (Buehn and Eichler 329). Individuals know that if they get caught smuggling goods, they will go to jail, which hurts their long run earning potential. When the economy provides an adequate number of well-paying jobs, individuals have a lower incentive to smuggle because the opportunity cost of smuggling has increased. A reduction of smuggling caused by the increased economic prospect was directly observable in Mexico from 1976 to 2004 as increased wages, and a reduction in unemployment reduced smuggling( Buehn and Eichler
When explaining why people choose to smuggle, I will draw from the work of Gary Becker and his model of rational choice theory for crime. When trying to understand the effects of smuggling in Mercantilism, I will build of the work of Peter Andreas(2013) who asserts that smuggling was necessary for America to prosper, Senior (1828) who thinks smuggling rectifies bad laws, and James(1961) who tries to quantify smuggling in 18th century Ireland. For modern markets, I will build off the work of Thursby, Jensen, and Thursby ( 1991), and Bhagwati and Hansen ( 1973) who both explore the effect of smuggling under different market …show more content…
Simply put. When the potential cost of smuggling goes up, the amount of smuggling goes down(Beuhn and Eichler 329; Becker 21). As the odds of getting caught increase, the expected value of each good decreases because the smugglers will face legal action if they get caught, so fewer goods are smuggled (Buehn and Eichler 329). Individuals know that if they get caught smuggling goods, they will go to jail, which hurts their long run earning potential. When the economy provides an adequate number of well-paying jobs, individuals have a lower incentive to smuggle because the opportunity cost of smuggling has increased. A reduction of smuggling caused by the increased economic prospect was directly observable in Mexico from 1976 to 2004 as increased wages, and a reduction in unemployment reduced smuggling( Buehn and Eichler