TY  - JOUR
AU  - Huang,Hui
AU  - Whalley,John
TI  - Baumol-Tobin and the Welfare Costs of National Security Border Delays
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12296
PY  - 2006
Y2  - June 2006
UR  - http://www.nber.org/papers/w12296
L1  - http://www.nber.org/papers/w12296.pdf
N1  - Author contact info:
Hui Huang
University of Western Ontario
E-Mail: hhuang@uwo.ca

John Whalley
Department of Economics
Social Science Centre
University of Western Ontario
London, ON N6A 5C2
CANADA
Tel: 519/661-3509
Fax: 519/661-3666
E-Mail: jwhalley@uwo.ca
AB  - 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.
ER  -