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Traders, Cops and Robbers

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  • James E. Anderson

Abstract

Why does illegal trade often flourish without formal enforcement, but sometimes fail? Why do illegal trade-reducing policies often fail? Why do States often appear to tolerate illegal trade? A model of trade with cops and robbers provides answers. `Safety in numbers' is a key element: the equilibrium probability of successful shipments is increasing in trade volume. Even without conventional fixed costs, safety in numbers implies scale economies which can explain the absence or robustness of trade subject to predation. Spilling over between markets, safety in numbers implies that illegal trade can foster legal trade and State revenue.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9572.

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Date of creation: Mar 2003
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Publication status: published as Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.
Handle: RePEc:nbr:nberwo:9572

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  1. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
  2. James E. Anderson & Douglas Marcouiller, 1997. "Trade and Security,I: Anarchy," NBER Working Papers 6223, National Bureau of Economic Research, Inc.
  3. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
  4. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-95, December.
  5. Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
  6. James E. Anderson & Douglas Marcouiller, S.J., 1997. "Anarchy and Autarky: Endogenous Predation as a Barrier to Trade," Boston College Working Papers in Economics 383, Boston College Department of Economics, revised 01 Oct 2001.
  7. Herschel I. Grossman, 1997. ""Make Us a King": Anarchy, Predation, and the State," NBER Working Papers 6289, National Bureau of Economic Research, Inc.
  8. Neher, Philip A, 1978. "The Pure Theory of the Muggery," American Economic Review, American Economic Association, vol. 68(3), pages 437-45, June.
  9. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  10. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
  11. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  12. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
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Cited by:
  1. Bensassi, Sami & Martínez-Zarzoso, Inmaculada, 2010. "How Costly is Modern Maritime Piracy for the International Community?," MPRA Paper 27134, University Library of Munich, Germany.
  2. James Anderson, 2009. "Does trade foster contract enforcement?," Economic Theory, Springer, vol. 41(1), pages 105-130, October.
  3. James E. Anderson, 2005. "Economic Integration and the Civilizing Commerce Hypothesis," Boston College Working Papers in Economics 673, Boston College Department of Economics.
  4. S. Michalopoulos & A. Naghavi & G. Prarolo, 2010. "Trade and Geography in the Economic Origins of Islam: Theory and Evidence," Working Papers 700, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," Working Paper 2004-17, Federal Reserve Bank of Atlanta.
  6. Anderson, James & Vesselovsky, Mykyta & Yotov, Yoto, 2014. "Gravity with Scale Economies," School of Economics Working Paper Series 2014-4, LeBow College of Business, Drexel University.
  7. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  8. Marcus Noland & Stephan Haggard, 2012. "Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration," Working Paper Series WP12-8, Peterson Institute for International Economics.
  9. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics 701, Boston College Department of Economics.
  10. James E. Anderson, 2006. "Commercial Policy in a Predatory World," NBER Working Papers 12576, National Bureau of Economic Research, Inc.

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