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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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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. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(6), pages 1272-95, December.
  2. James E. Anderson & Douglas Marcouiller, S.J., 1997. "Anarchy and Autarky: Endogenous Predation as a Barrier to Trade," Boston College Working Papers in Economics, Boston College Department of Economics 383, Boston College Department of Economics, revised 01 Oct 2001.
  3. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series, Research Institute of Industrial Economics 477, Research Institute of Industrial Economics.
  4. Herschel I. Grossman, 1997. ""Make Us a King": Anarchy, Predation, and the State," NBER Working Papers 6289, National Bureau of Economic Research, Inc.
  5. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers, International Monetary Fund 00/26, International Monetary Fund.
  6. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, Elsevier, vol. 53(1), pages 1-27, February.
  7. Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 630-46, June.
  8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 38(1), pages 77-114, March.
  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. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, Elsevier, vol. 53(2), pages 187-204, February.
  11. Neher, Philip A, 1978. "The Pure Theory of the Muggery," American Economic Review, American Economic Association, American Economic Association, vol. 68(3), pages 437-45, June.
  12. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
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Cited by:
  1. Sami Bensassi & Inmaculada Martínez-Zarzoso, 2011. "How Costly is Modern Maritime Piracy for the International Community?," Ibero America Institute for Econ. Research (IAI) Discussion Papers, Ibero-America Institute for Economic Research 208, Ibero-America Institute for Economic Research.
  2. James E. Anderson, 2007. "Does Trade Foster Contract Enforcement?," Boston College Working Papers in Economics, Boston College Department of Economics 672, Boston College Department of Economics.
  3. Anderson, James & Vesselovsky, Mykyta & Yotov, Yoto, 2014. "Gravity with Scale Economies," School of Economics Working Paper Series, LeBow College of Business, Drexel University 2014-4, LeBow College of Business, Drexel University.
  4. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2006. "Factor Returns, Institutions, and Geography: A View From Trade," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp166, IIIS.
  5. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, Springer, vol. 50(1), pages 169-191, May.
  6. James E. Anderson, 2008. "Commercial Policy in a Predatory World," Boston College Working Papers in Economics, Boston College Department of Economics 703, Boston College Department of Economics.
  7. James E. Anderson, 2005. "Economic Integration and the Civilizing Commerce Hypothesis," Boston College Working Papers in Economics, Boston College Department of Economics 673, Boston College Department of Economics.
  8. Marcus Noland & Stephan Haggard, 2012. "Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration," Working Paper Series, Peterson Institute for International Economics WP12-8, Peterson Institute for International Economics.
  9. Michalopoulos, Stelios & Naghavi, Alireza & Prarolo, Giovanni, 2010. "Trade and Geography in the Economic Origins of Islam: Theory and Evidence," MPRA Paper 23136, University Library of Munich, Germany.
  10. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics, Boston College Department of Economics 701, Boston College Department of Economics.

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