Smuggling around the World: Evidence from a Structural Equation Model

This article uses a Multiple Indicators Multiple Causes (MIMIC) model to analyse the determinants of smuggling. The analysis reveals that higher corruption and a lower rule of law encourage smuggling. Tariffs and trade restrictions are important push factors, while a higher Black Market Premium (BMP) discourages smugglers. Based on the MIMIC estimates, we calculate an index of smuggling which provides a ranking for 54 countries. We find that smuggling is rampant in Cameroon, Pakistan and Kenya while it is least prevalent in Switzerland, Finland and Sweden.

Buehn, Andreas and Mohammad Reza Farzanegan (2012), Smuggling around the World: Evidence from a Structural Equation Model, Applied Economics 44 , 3047-3064