IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i1p401-d305136.html
   My bibliography  Save this article

In What Measure Is Public Finance Sustainability Threatened by Illicit Tobacco Trade: The Case of Western Balkan Countries

Author

Listed:
  • Davor Mikulić

    (The Institute of Economics, Zagreb, Trg J.F. Kennedy 7, 10000 Zagreb, Croatia)

  • Goran Buturac

    (The Institute of Economics, Zagreb, Trg J.F. Kennedy 7, 10000 Zagreb, Croatia)

Abstract

The aim of this paper is to gain new knowledge about illicit tobacco trade in Western Balkan countries and its effects on public finance sustainability. It includes an estimation of the volume of illicit tobacco trade, identifying and quantifying the key factors that cause illegal tobacco trade, the effects of illegal tobacco trade on public finance sustainability, and the effects on the intensity of total tobacco trade. An empirical analysis was conducted using the data collected by field research on consumer preferences in tobacco products in Western Balkan countries (Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro, Serbia, and Slovenia). The reference research period is the year 2018. The results obtained show a high variability of volume of illicit tobacco trade in Western Balkan countries. While more than 20% of tobacco products in Montenegro and Bosnia and Herzegovina are bought on the gray market, a share of illicit tobacco trade lower than 5% is found in Slovenia and Macedonia. Underdeveloped institutional framework fighting against illicit trade and weak rule of law, coupled with the heavy taxation of tobacco products, are the key factors behind a higher intensity of illicit trade in comparison to more developed European Union (EU) economies. Illicit tobacco trade negatively affects the stability of public finance of Western Balkan economies and reduces the level of public service. It is especially important for the health system combating the negative consequences of smoking. Regular and illicit tobacco trade amongst Western Balkan countries is found to flow in opposite directions.

Suggested Citation

  • Davor Mikulić & Goran Buturac, 2020. "In What Measure Is Public Finance Sustainability Threatened by Illicit Tobacco Trade: The Case of Western Balkan Countries," Sustainability, MDPI, vol. 12(1), pages 1-19, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:1:p:401-:d:305136
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/1/401/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/12/1/401/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jha, Prabhat & Chaloupka, Frank (ed.), 2000. "Tobacco Control in Developing Countries," OUP Catalogue, Oxford University Press, number 9780192632463.
    2. John R. Baldwin & Wulong Gu, 2004. "Trade Liberalization: Export-market Participation, Productivity Growth, and Innovation," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(3), pages 372-392, Autumn.
    3. repec:bla:econom:v:55:y:1988:i:217:p:107-18 is not listed on IDEAS
    4. James E. Prieger & Jonathan Kulick, 2018. "Cigarette Taxes And Illicit Trade In Europe," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1706-1723, July.
    5. Jagdish Bhagwati & Bent Hansen, 1973. "A Theoretical Analysis of Smuggling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(2), pages 172-187.
    6. World Health Organization, 2017. "WHO report on the global tobacco epidemic 2017: Monitoring tobacco use and prevention policies," University of California at San Francisco, Center for Tobacco Control Research and Education qt8nw5p0zt, Center for Tobacco Control Research and Education, UC San Francisco.
    7. Peshevski, Mile & Ameti, Iljaz & Vukaj, Oriola & Petkov, Robert, 2013. "Trading Of Agricultural Products From Agrocomplex Between Countries From Balkan Region," Economics of Agriculture, Institute of Agricultural Economics, vol. 60(4), pages 1-9, December.
    8. John R. Baldwin & Wulong Gu, 2004. "Trade Liberalization: Export-market Participation, Productivity Growth, and Innovation," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 372-392, Autumn.
    9. A. Yurekli & O. Sayginsoy, 2010. "Worldwide organized cigarette smuggling: an empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 42(5), pages 545-561.
    10. Pitt, Mark M., 1981. "Smuggling and price disparity," Journal of International Economics, Elsevier, vol. 11(4), pages 447-458, November.
    11. Francesco Calderoni, 2014. "A new method for estimating the illicit cigarette market at the subnational level and its application to Italy," Global Crime, Taylor & Francis Journals, vol. 15(1-2), pages 51-76, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Recher, Vedran, 2020. "Illegal tobacco demand: The case of Western Balkan," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 182-193.
    2. Andreas Buehn & Mohammad Reza Farzanegan, 2012. "Smuggling around the world: evidence from a structural equation model," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3047-3064, August.
    3. Richard Harris & John Moffat, 2011. "R&D, Innovation and Exporting," SERC Discussion Papers 0073, Centre for Economic Performance, LSE.
    4. Connely, Michael & Devereux, John & Cortes, Mariluz, 1995. "The transhipment problem: Smuggling and welfare in Paraguay," World Development, Elsevier, vol. 23(6), pages 975-985, June.
    5. Sonia Mukherjee, "undated". "The Role of Services in Enhancing Indian Manufacturing Exports: A Firm Level Analysis, 2000-01 to 2011-12," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 15-08, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    6. Landesmann, Michael A, 2022. "Luigi Pasinetti on growth and structural change in international economic relations," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 556-564.
    7. Ana Paula Cusolito & Claire H. Hollweg, 2015. "Trade Policy Barriers: An Obstacle to Export Diversification in Eurasia," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(4), pages 91-129, June.
    8. Lee, Cassey, 2011. "Trade, productivity, and innovation: Firm-level evidence from Malaysian manufacturing," Journal of Asian Economics, Elsevier, vol. 22(4), pages 284-294, August.
    9. Wulong Gu, 2018. "Accounting for Slower Productivity Growth in the Canadian Business Sector after 2000: The Role of Capital Measurement Issues," International Productivity Monitor, Centre for the Study of Living Standards, vol. 34, pages 21-39, Spring.
    10. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2013. "The Impact of Trade Integration with the European Union on Productivity in a Posttransition Economy: The Case of Polish Manufacturing Sectors," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(2), pages 84-104, March.
    11. Cristian Barra & Nazzareno Ruggiero, 2022. "On the impact of knowledge and institutional spillovers on RIS efficiency. Evidence from Italian regional level," Growth and Change, Wiley Blackwell, vol. 53(2), pages 702-752, June.
    12. Anna Giunta & Domenico Scalera & Francesco Trivieri & Jeffrey B. Nugent & Mariarosaria Agostino, 2011. "Firm Productivity, Organizational Choice and Global Value Chain," Working Papers 2011R09, Orkestra - Basque Institute of Competitiveness.
    13. Magnus Lodefalk, 2014. "The role of services for manufacturing firm exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 59-82, February.
    14. Pascal L. Ghazalian & Ali Fakih, 2017. "R&D and Innovation in Food Processing Firms in Transition Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 427-450, June.
    15. Kazuhiko Yokota & Akinori Tomohara, 2009. "Extending the Learning-By-Exporting Hypothesis: Introducing a Credit Constraint," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(2), pages 169-177, May.
    16. repec:kap:iaecre:v:15:y:2009:i:2:p:169-177 is not listed on IDEAS
    17. T. Gries & M. Redlin, 2020. "Trade and economic development: global causality and development- and openness-related heterogeneity," International Economics and Economic Policy, Springer, vol. 17(4), pages 923-944, October.
    18. Saon Ray, 2014. "What Explains the Productivity Decline in Manufacturing in the Nineties in India?," Working Papers id:6280, eSocialSciences.
    19. Dalgic, Basak & Fazlioglu, Burcu & Gasiorek, Michael, 2015. "Costs of trade and self-selection into exporting and importing: The case of Turkish manufacturing firms," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-28.
    20. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 557-592, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:12:y:2020:i:1:p:401-:d:305136. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.