| dc.description.abstract | Diapers are sold at much lower prices in Norway than in the rest of Europe. The large price difference has led to smuggling of diapers, mainly to Eastern-European countries. The diaper smuggler gain both from the price difference and by evading taxes on the trade. In this thesis, I analyze the economics of diaper smuggling, both theoretically and empirically. First, I give an overview of the diaper market and try to explain why diapers are so cheap in Norway compared to other countries. Second, I discuss the literature on tax evasion and smuggling, and derive a framework for the optimal decision of diaper smugglers. Finally, I calculate the costs and gains of smuggling, and use the theoretical framework to calculate the profitability of this trade (i) compared to trading legally and (ii) compared to regular employment. I also calculate the tax loss to the importing country. The calculations are made for various assumptions about the unknown factors, such as the probability of detection. | eng |