Mutual supervision in preshipment inspection programs

Preshipment inspection (PSI) programmes are implemented in many developing countries to assist governments in the collection of revenue at their borders. These programs consist of the delegation of the inspection of imports to a private firm. To study these PSI programmes, we develop a hierarchical...

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Bibliographic Details
Published in:Journal of development economics 2012-11, Vol.99 (2), p.282-291
Main Authors: Dequiedt, V., Geourjon, A.-M., Rota-Graziosi, G.
Format: Article
Language:English
Subjects:
Corruption
Customs
Customs administration
Customs regulations
Developing countries
Economic models
Economics and Finance
Humanities and Social Sciences
Import taxes
Imports
Inspections
Monitoring
Mutual supervision
Preshipment inspection
Shipments
Studies
Subcontracting
Tax collection
Tax revenue
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Summary:Preshipment inspection (PSI) programmes are implemented in many developing countries to assist governments in the collection of revenue at their borders. These programs consist of the delegation of the inspection of imports to a private firm. To study these PSI programmes, we develop a hierarchical agency model in which the government authority can rely on two supervisors, namely the private inspection firm and the customs administration, to control importers' declarations. The government's optimal contract is fully characterized. We devote some attention to the inspection policy and its comparative statics properties. In particular, we identify the situations in which PSI programmes are revenue enhancing. We also discuss the reconciliation policy, i.e. what to do in case of conflicting inspection reports by the inspection firm and the customs administration. In the optimal mechanism, mutual supervision between the inspection firm and the customs administration is used to provide adequate incentives to all parties.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2012.02.005