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Commercial Policy in a Predatory World

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  • James E. Anderson

    () (Boston College)

Abstract

Predation---extortion or theft---imposes significant endogenous costs on trade, with rich implications for trade policy. The model of this paper shows that the response of trade to liberalization depends on the strength of enforcement against predators. Efficient commercial policy may either tax or subsidize trade. The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Insecurity induces an international externality alternative that of the standard terms of trade effect. Tolerance or intolerance of smuggling can be rational depending on the weakness or strength of enforcement, illustrated by the switch from the former to the latter by Britain in regard to its North American colonies.

Suggested Citation

  • James E. Anderson, 2008. "Commercial Policy in a Predatory World," Boston College Working Papers in Economics 703, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:703
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    References listed on IDEAS

    as
    1. BRUNETTI, AYMO AART OLIVER & Kisunko,Gregory & Weder,Beatrice Silvia, 1997. "Institutional obstacles to doing business : region-by-region results from a worldwide survey of the private sector," Policy Research Working Paper Series 1759, The World Bank.
    2. repec:ags:afjare:141665 is not listed on IDEAS
    3. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, pages 197-215.
    4. Schiff, Maurice & Winters, L Alan, 1998. "Regional Integration as Diplomacy," World Bank Economic Review, World Bank Group, pages 271-295.
    5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, pages 691-751.
    6. Avinash Dixit, 2003. "On Modes of Economic Governance," Econometrica, Econometric Society, pages 449-481.
    7. James E. Anderson, 2008. "Economic Integration and the Civilising Commerce Hypothesis," The World Economy, Wiley Blackwell, vol. 31(1), pages 141-157, January.
    8. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications, The World Bank, number 15172.
    9. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, February.
    10. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, pages 197-215.
    11. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier.
    12. 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.
    13. James E. Anderson & Eric van Wincoop, 2001. "Borders, Trade and Welfare," NBER Working Papers 8515, National Bureau of Economic Research, Inc.
    14. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
    15. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, pages 353-357.
    16. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
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    Cited by:

    1. Sami Bensassi & Inmaculada Martínez-Zarzoso, 2012. "How Costly is Modern Maritime Piracy to the International Community?," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 869-883, November.
    2. Anderson, James E., 2015. "Terrorism, trade and public policy," Research in Economics, Elsevier, pages 180-190.
    3. Anderson, James E., 2015. "Terrorism, trade and public policy," Research in Economics, Elsevier, pages 180-190.

    More about this item

    Keywords

    commercial policy; predation; extortion; theft; trade costs; trade policy;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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