Estimating the Size of the Informal Trade Across the World: Evidence from a MIMIC Approach
- PDF / 901,327 Bytes
- 52 Pages / 439.37 x 666.142 pts Page_size
- 99 Downloads / 196 Views
Estimating the Size of the Informal Trade Across the World: Evidence from a MIMIC Approach Mehdi Abid 1
Received: 18 November 2015 / Accepted: 23 February 2017 # Springer Science+Business Media New York 2017
Abstract This paper presents the informal trade estimates for 184 countries including North America, Latin America and the Caribbean, South Asia, East Asia and Pacific, Europe and Central Asia, Middle East and North Africa, and the countries of SubSaharan Africa covering the period 2002–2013. In the presence of a model with multiple indicators and multiple causes (MIMIC), the empirical results indicate that the average rate of global informal trade (in % of formal trade) in 184 countries is 20.06%, 22.22% in 35 North America, Latin America and the Caribbean countries, 20.048% in 8 South Asia countries, 15.57% in 27 East Asia and Pacific countries, 16.67% in 48 Europe and Central Asia countries, 18.43% in 21 Middle East and North Africa countries, and 25.23% in 45 Sub-Saharan Africa countries. We suggest policies (economic) to solve the informal trade dilemma not only in the abovementioned regions but also in different countries. The solutions include simplifying regulations and procedures, promoting effective and free government, tackling corruption, increasing the likelihood of control over borders, reducing unnecessary transaction costs; and finally, creating or reforming market institutions. Keywords Informal trade . Institutions . Regulation . Structural equation model JEL Classification O17 . D78 . H11 . P37
Introduction In recent years, several countries in the world have reduced tariff and non-tariff barriers on imports and have opened their markets to foreign competition (Pavcnik 2002;
* Mehdi Abid [email protected]
1
Laboratory of Management of Innovation and Sustainable Development, University of Sousse, Cité Erriadh, 4023 Sousse, Tunisia
J Knowl Econ
Trefler 2004; Amiti and Konings 2007; Fernandes 2007; Acosta and Rojas 2010; Topalova and Khandelwal 2011 among others). Reducing the cost of trade could substantially increase revenues and improve the well-being of people, especially in the developing world where such costs are the highest (Obstfeld and Rogoff 1995; Frankel and Romer 1999; Rodriguez and Rodrik 2000). In many developing countries and even developed ones, exchanges were mostly created in the informal trade sector (Akinboade 2005; Paz 2014). Informal cross-border trade is defined as commercial transactions utilizing residents and non-residents beyond the economic borders of two or several countries, transactions which are mainly not recorded by the customs authorities. This informal trade manifests itself in different ways in different countries, in different regions of the same country and even in different parts of the same city. It includes different types of activities, types of businesses, and different motivations for participation. This phenomenon is similar to a clandestine passenger. It accommodates public goods and services it consumes, but does not participate in fina
Data Loading...
