Cross-border Shopping Research Articles

Microenterprise Peso Acceptance in El Paso, Texas

Utilizing a unique sample of 253 microenterprise border retailers from El Paso, Texas, this paper explores the possibility of cash payment from cross-border shoppers using Mexican pesos. We find that one-fifth of microenterprise retailers in El Paso accept payment in Mexican pesos. Increased peso acceptance rates are associated with retailer proximity to Mexico and business segment in which the retailers compete. El Paso microenterprises are also more likely than their medium- to large-business counterparts to allow payments to be made using Mexican pesos. The opportunity cost of currency substitution is examined for accepting and yet-to-accept firms. JEL Classification: M21, F31, D22.

Mexican cross-border shoppers' motivations to the USA

Purpose – This study aims to examine the patterns of cross-border consumption of Mexican tourist-shoppers to the USA. More specifically, integrating literature from two ends – retail studies on shopping motivations and tourism research viewing cross-border shopping as leisure activities, this study aims to investigate the motivations of Mexican travelers as cross-border shoppers. Design/methodology/approach – A survey instrument was developed incorporating a set of 30 shopping motivation questions. Data were collected using the intercept survey methodology from 92 Mexican visitors who shopped at a major outlet shopping center in Central Texas in 2007. The motivational items were subsequently factor analyzed for possible underlying dimensions. Findings – Motivations of cross-border shopping by Mexicans in Texas demonstrated a combination of two aspects, the utilitarian and pleasurable shopping experiences. The cross-border consumption and shopping by Mexican residents in Texas, therefore, were both functional and recreational. Originality/value – With a better understanding of the pattern and motivations of cross-border shopping, this study developed a model to capture the stimulating influence of the retail environment as well as a framework to illustrate the integrated role of shopping and tourism in the process of developing a “must visit” destination.

Unit tax versus ad valorem tax: A tax competition model with cross-border shopping

Within the framework of spatial tax competition with cross-border shopping, we examine the choice of tax method between ad valorem tax and unit (specific) tax. This study shows that governments endogenously choose the ad valorem tax method not because of a classic welfare reason, but because it is a good strategy to compete for mobile consumers. Another key finding is that while governments are committed to the ad valorem tax method, the choice leads to inferior outcome; tax-cutting competition becomes more serious when countries adopt ad valorem tax, and competition in ad valorem tax results in smaller tax revenue than competition in unit tax.

Cross-border shopping and the Atkinson–Stiglitz theorem

We introduce cross-border shopping and indirect tax competition into a model of optimal taxation. The Atkinson–Stiglitz result that indirect taxation cannot improve the efficiency of information-constrained tax-transfer policies, and that indirect taxes should not be differentiated across goods, is shown to hold in this case even if countries are asymmetric. However, if the tax system must contain indirect taxation, differentiated indirect tax rates arise in the equilibrium and restricting differentiated indirect taxation can be welfare-increasing.

Cross-Border Shopping: Do Consumers Respond to Taxes or Prices?

Higher sales tax or price in the home country relative to a neighboring country create a huge incentive for consumers living closer to the border to purchase goods in the neighboring country in comparison to consumers living further away from the border. Using a unique panel data set of consumer financial transactions, we find that consumers facing higher domestic sales tax and living close to the border overall spend 2 percent less domestically, and 32 percent less in substitutable categories. For goods that cannot be purchased across the border (utilities and services) or for which distance is irrelevant (direct marketing) there is no difference in spending behavior. Finally, we also look at store sales and find that domestic sales of stores near the border are lower.

Revenue functions and Dupuit curves for indirect taxes with cross-border shopping

Norway imposes some of the highest tax rates on alcoholic beverages and tobacco in the world, making, e.g., cross-border shopping an attractive activity for Norwegians. In light of this fact, we pose the question: Could we increase the total tax revenue from indirect taxes by decreasing tax rates on, e.g., spirits in Norway? When using an empirically based consumer model including cross-border shopping, tax-free shopping, and smuggling, we do find revenue curves implying total tax revenue maximizing tax rates. But we also find that these tax rates are always higher than the observed tax rates, i.e., suggesting that the answer to our question is no. In addition, we compare our results to a closed economy setting without cross-border shopping, etc. We find that the existence of cross-border shopping, etc. affects the shape of the revenue curves somewhat, although not dramatically.

Cross-Border Differences and Unfamiliarity: Shopping Mobility in the Dutch-German Rhine-Waal Euroregion

Many international differences can be experienced in shopping spaces on both sides of a national border. Other languages, unfamiliar goods and unknown spatial codes are only a few of the physical-functional and socio-cultural differences that could cause exciting and stimulating situations but could also be perceived as problematic and deterring. This paper analyses perceptions, motivations and practices of cross-border (non-)shoppers and provides insights into ways in which people from cross-border regions deal with differences and the extent to which they interact across borders. The aim is to both theoretically and empirically substantiate the dynamic concept of (un)familiarity by scrutinizing the impact of “push”, “pull”, “keep” and “repel” factors on shopping (im)mobility in the Dutch-German Rhine-Waal Euroregion. These factors are seen as rooted in dynamic processes of constructing, deconstructing and reconstructing differences between places on both sides of the border. In so doing, attention is paid to changing shopping practices and motivations and influencing changing perceptions of international differences. As such, the paper also discusses “familiarization processes” in cross-border regions. The concluding section provides critical reflections on the current European policy approach towards cross-border regional development. In fact, the paper ends with a plea for more instead of less borders, as borders are markers of international differences which could promote cross-border mobility.

Drinking in the Shadow Economy

One in ten bottles or cans of beer sold in the UK have not had duty paid on them and there are growing reports of counterfeit spirits being sold by licit and illicit retailers. HMRC seized almost ten million litres of non-duty paid alcohol in 2010/11, a rise of 30 per cent in two years. The UK loses more revenue from the cross-border movement of alcohol than any other EU state. The aim of this paper is to identify the factors that encourage the production, distribution and purchasing of alcohol in the shadow economy.Unrecorded alcohol encompasses smuggled alcohol, commercially manufactured counterfeit alcohol, domestic brewing and distilling, surrogate alcohol, alcohol fraud and cross-border shopping. Failing to deal with alcohol’s shadow economy threatens not only the public finances, but also public health and public order. Counterfeit spirits and surrogate alcohol frequently contain dangerous levels of methanol, isopropanol and other chemicals which cause toxic hepatitis, blindness and death. Alcohol smuggling and counterfeiting is linked to other illegal activities, including drug smuggling, prostitution, violence, money-laundering and terrorism. Factors which lead to shadow economic activity include high taxes and social security payments, low tax morale, complex tax systems, low Gross Domestic Product, weak institutions and corruption. Evidence shows that the illicit alcohol market is also closely associated with high taxes, corruption and poverty. The affordability of alcohol appears to be the key determinant behind the supply and demand for smuggled and counterfeit alcohol. Affordability is low in some countries due to low incomes (e.g. Eastern Europe) and in others because of high alcohol duty (e.g. Scandinavia). The price of alcohol in neighbouring markets also influences rates of unofficial consumption. Demand for alcohol is relatively inelastic and drinkers have a series of options available to them when real prices increase. They can do as the government hopes and drink less, but they can also do any of the following: (1) make savings elsewhere in the household budget, (2) switch from the on-trade to the off-trade, (3) downshift to cheaper drinks, (4) shop abroad, (5) brew or distil their own alcohol, (6) buy counterfeit or smuggled alcohol, and finally (7) buy surrogate alcohol (e.g. methanol, antifreeze, aftershave). The extent to which consumption patterns change depends on personal income and the affordability of alcohol. Our analysis indicates that the affordability of alcohol does not have a strong effect on how much alcohol is consumed. Once unrecorded alcohol is included in the estimates, it can be seen that countries with the least affordable alcohol have the same per capita alcohol consumption rates as those with the most affordable alcohol. Alcohol duty provides significant income to European governments, but maximising these revenues carries significant risks in terms of health, crime and secondary poverty. Lessons can be learnt from countries which have low rates of unrecorded alcohol. We conclude that economic prosperity, moderate taxation and minimal corruption are essential for a country to minimise the size the alcohol black market. Without these preconditions, efforts to tackle the illicit alcohol supply through education, deterrence and enforcement are unlikely to succeed.

Estimating the extent of cross-border lottery shopping: evidence from South Carolina

The South Carolina Education Lottery (SCEL) began selling tickets in 2001. Early studies indicate significant cross-border shopping, especially in counties bordering North Carolina (NC), which created its own lottery in 2006. We examine the impact of the North Carolina Education Lottery (NCEL) on sales of lottery tickets in South Carolina (SC). We find that the introduction of the NCEL coincides with a significant drop in lottery sales in SC counties bordering NC. By creating its own lottery, NC successfully redirected the flow of lottery dollars to its own coffers.

Mexican national cross-border shopping: Exploration of retail tourism

This exploration of cross-border shopping by Mexican national shoppers at a regional discount outlet mall studies the: (1) economic impacts of their expenditures on the local and regional economies, and (2) activities they engage in while at the outlet malls and benefits received from shopping there. Spending by cross-border shoppers varied by accommodation type; hotels or motels/friends and family spent approximately $800 (U.S.) on clothing daily and condominiums/day visitors between $400 and $475 (U.S.). The multiplier for cross-border spending at the local level ranged from 1.27 to 1.45. Top cross-border shopper activities were shopping and buying, followed by eating, and visiting.

A profile of the mainland Chinese cross-border shoppers: Cluster and discriminant analysis

This study explores the motivation for cross-border shopping from mainland China to Hong Kong, identifies cross-border shopper typologies, and proposes means of segmenting the market for cross-border shopping. It also develops a model to predict consumers' cluster membership based on their attitude and behavior towards cross-border shopping. A total of 194 respondents were recruited. Three groups of tourists, namely leisure buyers, planned buyers, and infrequent buyers were identified by hierarchical cluster and discriminant analysis based on their motivation and attitudes. The resulting segmentation produces information that can be used in terms of targeting and promoting cross-border shopping in a strategic approach. Nonetheless care should be taken when applying the results due to small and non-random samples, and the fact that no seasonal effect was included in the research.

Games within borders: are geographically differentiated taxes optimal?

The discontinuous tax treatment of sales at borders creates incentives for individuals to cross-border shop. This paper addresses whether it is optimal for a state composed of multiple regions to levy differentiated commodity tax rates across the regions. In a model where states maximize social welfare, a state’s optimal commodity tax system is almost always geographically differentiated. The optimal pattern of geographic differentiation critically depends on fundamental parameters as well as whether the state has a preference for high or low taxes. Under the assumption that utility is linear in consumption and that the elasticity of cross-border shopping is less than unity in absolute value, high-tax states will find it optimal to set a tax rate that is lower in the border region than in the periphery region and low-tax states will find it optimal to set a tax rate that is higher in the border region than in the periphery region. Optimizing high-tax states will set a higher tax rate in the border region if the social welfare measure is sufficiently redistributive. With welfare maximization, it is possible for taxes to be higher in the region near the state border—an outcome that cannot arise when the government cares only about total tax revenue.

Cross‐border shopping: Mexican shoppers in the US and American shoppers in Mexico

AbstractThis paper draws on a qualitative, empirical investigation of the two‐way flow of consumers across a US–Mexico border to shed light on utilitarian and hedonic motives that give rise to cross‐border shopping (CBS). An intriguing first observation pertains to the prevalence of consumerist culture among Mexican and American consumers: both groups exhibit generally comparable levels of consumerist culture and shopping orientations/values despite their differential economic statuses. Although each of the two groups exhibit both utilitarian and hedonic motives, the meanings and experiences of CBS are different for the two groups. Shopping in the US manifests the consumerist culture and the need for excess and exposes materialistic values. Shopping in Mexico, on the other hand, represents a means of survival. Discussion and research implications are exposed.

Почему петербуржцы отправляются за покупками в Финляндию? Исследование трансграничного шопинга

The paper discusses cross-border shopping considering it as a practice of shopping outside one’s country of residence. The article is focused on the shopping practices of St Petersburg residents visiting the capital of Finland. The popularity of cross-border shopping has been increasing over in Russia as it became a part of the middle-class lifestyle. Drawing on the data from qualitative interviews, author discusses a set of reasons stimulating and restraining cross-border shopping.

EU Strategies in Finding the Optimal Consumer Law Instrument*

The paper discusses the different proposals under existing EU law to develop a coherent body of consumer law which both increases market integration by removing obstacles due to differing Member state consumer protection provisions, and at the same time enhances consumer confidence in cross border shopping. The author argues that the consumer provisions of Art. 6 (2) Rome I-Regulation 593/2008 should not be regarded as an impediment to trade, but rather as an instrument, if interpreted by the principle of equivalence and allowing trader’s choice of his home law under harmonised EU-provisions, to encourage business to develop soft law instruments to allow consumers a ”high level of protection“, namely by providing for adequate remedies in case of non-conforming delivery and quality, and by including ADR/ODR mechanisms.

The effects of cross-border tourist purchases on retail performance

One of the major novelties in modern retail that is gaining more and more prominence is the concept of cross-border shopping. Factors affecting the rapid development of cross-border shopping are numerous, such as price differentiation, quality, convenience, demographic and social characteristics, good organizational structure developed in modern retail and many others. Among the influencing factors, the role of price differentiation of goods and services is very important and it is also affected by numerous factors. Those are: value added tax, profit margins, operating costs, exchange rates, inflation, differentiation of organizational structure in retail, the application of advanced information and communication technology and others. Cross-border shopping is, in itself, very important influential factor for the development of tourism, target retail market, performance of retail companies and living standard. Altogether, this has a positive effect on the overall performance of the national economy.

The Power of E-Commerce in the Global Trade Industry: A Realistic Approach to Expedite Virtual Market Place and Online Shopping from anywhere in the World.

This research paper delves into the transformative influence of e-commerce within the expansive realm of global trade. Focused on elucidating the dynamics of cross-border online shopping, the study scrutinizes the intricate interplay between consumer behavior and cybersecurity measures, crucial in fostering trust and fortifying the online marketplace. Two key domains are meticulously examined. Firstly, an in-depth analysis probes into the multifaceted realm of Consumer Behavior in Cross-Border E-commerce Transactions. Through comprehensive surveys and literature reviews, the study explores the nuanced factors shaping consumer decisions, encompassing cultural disparities, risk perceptions, payment preferences, and logistical concerns. Secondly, the paper meticulously investigates Security Measures and Protocols vital in allaying consumer apprehensions. Employing empirical studies and industry reports, the research evaluates the efficacy of security measures in addressing data privacy, payment security, and product authenticity, pivotal in nurturing consumer trust and bolstering confidence in cross-border transactions. Leveraging a mixed-methods research approach encompassing statistical analyses, graphical representations, and historical cyber threat assessments from 2000 to 2011, this paper unfolds the evolving landscape of global e-commerce. It underscores the escalating significance of convenience, product diversity, competitive pricing, and robust cybersecurity in shaping consumer preferences and purchase behavior in the burgeoning digital marketplace. In conclusion, the findings underscore the critical need for continuous advancements in cybersecurity protocols and a comprehensive comprehension of consumer behavior to enhance the cross-border e-commerce experience. This study advocates for ongoing improvements in security frameworks and a holistic understanding of consumer behavior, pivotal in fortifying the global trade industry's resilience in the face of cyber threats while nurturing a trustworthy and seamless online shopping environment worldwide.

THE EFFECTS OF PREFERENTIAL VAT RATES NEAR INTERNATIONAL BORDERS: EVIDENCE FROM MEXICO

Most goods and services in Mexico are subject to a 16 percent value added tax (VAT). However, within 20 kilometers of the border with the United States, the VAT rate is 11 percent. This preferential rate was implemented by the Mexican Department of Revenue to reduce cross-border shopping in the United States. However, the tax differential also creates an unusual distortion within Mexico, encouraging Mexicans to travel to the preferential tax zone for shopping. This paper performs an empirical test of tax avoidance using the Mexican Economic Census, comparing towns on either side of the 20 kilometer threshold using a regression discontinuity design. The analysis provides evidence of a modest but statistically significant distortion in economic activity toward the preferential tax zone.

Below-cost legislation: lessons from the Republic of Ireland

This article traces the emergence, evolution and demise of below-cost legislation in the grocery industry in the Republic of Ireland. The article adds to our understanding of the legislation by adopting the view that, by using the net invoice price as its definition of cost, the legislation increased two streams of quasi-rents, first on suppliers' brands and second on retailers' own brands, which acted to depress competitive forces and direct supplier–buyer negotiations to off-invoice discounts. Supplier-generated quasi-rents financed discounts and, when coupled with retailers' higher margins on their own brands, provided little incentive for a return to a price-competitive environment. Two factors undermined this situation: the substitution of discounters' products for suppliers' brands as the discounters share of the market grew and the increase in cross-border shopping. These had the combined effect of reducing the available quasi-rents earned in the Irish market, resulting in the breakdown of the status quo and a return to price competition. Through its impact on negotiations, the legislation also introduced inefficiencies to both retailers' and suppliers' businesses, representing additional waste that could have been more productively used to reduce consumer prices. The article endorses the Government's decision to rescind the order and remove an important constraint on both vertical and horizontal competitions. Lessons from the Republic of Ireland suggest that the competitive response to the removal of below-cost legislation, and reductions in prices, may take time and will depend on economic circumstances and a change in the prevailing norms of organisational behaviour and quasi-rent seeking opportunities.

Alcohol under the radar: Do we have policy options regarding unrecorded alcohol?

Background According to the World Health Organization, the public health impact of illicit alcohol and informally produced alcohol should be reduced. This paper summarizes and evaluates the evidence base about policy and intervention options regarding unrecorded alcohol consumption. Methods A systematic review of the literature using electronic databases. Results The literature on unrecorded consumption was sparse with less than 30 articles about policy options, mostly based on observational studies. The most simplistic option to reduce unrecorded consumption would be to lower recorded alcohol prices to remove the economic incentive of buying unrecorded alcohol. However, this may increase the net total alcohol consumption, making it an unappealing public health policy option. Other policy options largely depend on the specific sub-group of unrecorded alcohol. The prohibition of toxic compounds used to denature alcohol (e.g. methanol) can improve health outcomes associated with surrogate alcohol consumption. Cross-border shopping can be reduced by either narrowing the tax differences, or stricter control. Actions limiting illegal trade and counterfeiting include introduction of tax stamps and electronic surveillance systems of alcohol trade. Education campaigns might increase the awareness about the risks associated with illegal alcohol. The most problematic category appears to be the home and small-scale artisanal production, for which the most promising option is to offer financial incentives to the producers for registration and quality control. Conclusion Even though there are suggestions and theories on how to reduce unrecorded alcohol consumption, there is currently no clear evidence base on the effectiveness or cost effectiveness of available policy options. In addition, the differences in consumption levels, types of unrecorded alcohol, culture and tradition point to different measures in different parts of the world. Thus, the recommendation of a framework for moving forward in decision making currently seems premature. Instead, there is a need for systematic research.