A Behavioral Perspective on Informal Cross-Border Trading

Marcus Møller Larsen*, Rebecca Namatovu, Rajneesh Narula

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review


Informal cross-border trade (ICBT) involves trade that wholly or partly evades payment of duties and charges and is a highly prevalent business practice in developing countries. We focus on the persistence of ICBT despite government interventions to increase formalization, and explore how informal traders’ behaviors influence their appreciation or adoption of interventions for formalization. We argue that the potential for formalizing ICBT depends on how the informal traders evaluate the prospects of remaining informal versus changing to formality. Based on a qualitative case study of the introduction of a simplified trade regime (STR) at the Busia trading post between Uganda and Kenya, we find that informality persists due to a supportive, informal social network, skepticism of government/state programs, and perceived superiority of informal. We contribute by explicitly acknowledging the role of socio-economic behavior in explaining informality persistence even when simple formalization interventions are introduced.
Original languageEnglish
Title of host publicationProceedings of the 65th Annual Meeting of the Academy of International Business. AIB 2023 : International Business Resilience under Global Disruptions
EditorsKazuhiro Asakawa, Tunga Kiyak
Number of pages1
Place of PublicationEast Lansing, MI
PublisherAcademy of International Business
Publication date2023
Publication statusPublished - 2023
EventAIB 2023 Annual Meeting: International Business Resilience under Global Disruptions - SGH Warsaw School of Economics, Warsaw, Poland
Duration: 5 Jul 20239 Jul 2023
Conference number: 65


ConferenceAIB 2023 Annual Meeting
LocationSGH Warsaw School of Economics
Internet address
SeriesProceedings of the Annual Meeting of the Academy of International Business

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