Smuggling and Unemployment
What we learn from economic theory about the relationship between smuggling and unemployment?
Unfortunately, as far as I have searched, we will not find something clear in theoretical economics about this important aspect. In Empirical studies which mainly focus on the link between shadow economy and unemployment the similar ambiguity can be observed. Generally speaking, there are 2 possible potential links between smuggling and unemployment:
First, through business cycle effects. Increasing unemployment may be an indicator of recession and therefore we should expect a reduction in power of purchase of people. So their effective demand fir both legal and illegal imports will be reduced.
Secondly, increasing unemployment may create motivation for seeking job within shadow economy and smuggling can be an alternative for unemployment in official economy. So, increasing official unemployment rate may increase motivation for illegal business and reducing the risk of engaging in these activities.
Any comment and idea on this topic is highly welcome!
Mohammad
posted by Mohammad Reza Farzanegan @ 01:09
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