Baumol-Tobin and the Welfare Costs of National Security Border Delays

8 Pages Posted: 16 Jun 2006 Last revised: 6 Feb 2021

See all articles by Hui Huang

Hui Huang

Department of Economics, University of Waterloo

John Whalley

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for International Governance and Innovation (CIGI)

Date Written: June 2006

Abstract

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.

Suggested Citation

Huang, Hui and Whalley, John, Baumol-Tobin and the Welfare Costs of National Security Border Delays (June 2006). NBER Working Paper No. w12296, Available at SSRN: https://ssrn.com/abstract=908535

Hui Huang

Department of Economics, University of Waterloo ( email )

Department of Economics
University of Waterloo
Waterloo, Ontario N2L 3G1
Canada

John Whalley (Contact Author)

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-3509, ext. 83509 (Phone)
519-661-3666 (Fax)

HOME PAGE: http://www.ssc.uwo.ca/economics/faculty/

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for International Governance and Innovation (CIGI) ( email )

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Waterloo, Ontario N2L 6C2
Canada

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