Channelizing Afghanistan to Pakistan informal trade into formal channels

Adil Khan Miankhel

No 41, PSSP working papers from International Food Policy Research Institute (IFPRI)

Abstract: This paper focuses on assessing the possibility of bringing informal trade from Afghanistan to Pakistan into the legal channels by reducing tariff and tax differentials between Pakistan and Afghanistan. A basic model and illustrative example are presented that encompass the monetary incentives of smugglers and shows possible tariff/tax reductions that bring profits from informal trade below the breakeven point. The effects of price discounting of informally traded products in the Pakistan market and possible under-invoicing by traders are also taken into consideration.

Keywords: smuggling; trade barriers; capacity development; formal sector; trade policies; trade; trade agreements; tariffs; Afghanistan; Pakistan; Southern Asia; Asia (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:fpr:psspwp:41

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