Working Paper: NBER ID: w12296
Authors: Hui Huang; John Whalley
Abstract: The implications of national security related procedures for trade flows at border points in OECD countries has become a major topic of commentary in popular press. We discuss whether the economic costs of border delays are represented solely by time spent in awaiting processing. This has been the basis of calculations in Canada-US-Ontario (2004) and Ontario Chamber of Commerce (2004, 2005) of advalorem equivalent tariff representations of the time delays involved. While time can be a significant part of the social cost of security related delays in customs clearance, added costs also arise from the behavioral response to delays and looking only at the time delays at the border can be misleading. We use a formulation where border delays occur with certainty and add to the fixed costs of importing in any period. We develop analytics for the case where there is endogeneity both in the frequency of transactions and in the size of individual transactions across the border in the tradition of the well known Baumol (1952) and Tobin (1952) inventory theoretical analysis of the demand for money.
Keywords: No keywords provided
JEL Codes: F1; F10; F13; F19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| border delays (F55) | increased inventory holding costs (G31) |
| border delays (F55) | reduction in frequency of transactions (G50) |
| reduction in frequency of transactions (G50) | increased inventory holding costs (G31) |
| border delays (F55) | larger, less frequent orders (C69) |
| larger, less frequent orders (C69) | increased inventory holding costs (G31) |