A New Institutional Economics Approach to Smuggling

The current book deals with the economic analysis of smuggling business at the Goma-Gisenyi border. The smuggling debate in economics focuses exclusively on the welfare impacts of this informal business. In this debate, there is unanimity among scholars on the fact that smuggling is welfare increasing when transaction costs are higher in formal cross border trade than in smuggling. However mechanisms whereby smugglers minimize these costs and overcome obstacles encountered at the border have received little attention. This constitutes a weakness in the debate given that the survival and thriving of smuggling activities, and there-fore their welfare impact, depend largely upon what is going on the border, how smugglers negotiate with institutions on the border, how they overcome obstacles established by these institutions and tools they resort on to reduce transaction costs incurred when taking goods across the border. This book is a contribution to the smuggling debate in economics in that it goes beyond the well known welfare analysis of smuggling and tries to explain, using the New Institutional Economics Framework, the economic success of smugglers. A particularly attention is paid on how smugglers minimize their transaction costs and solve problems of moral hazard and adverse selection encountered in their business.