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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.

Suggested Citation

  • James E. Anderson, 2003. "Traders, Cops and Robbers," NBER Working Papers 9572, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9572
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    References listed on IDEAS

    as
    1. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series 477, Research Institute of Industrial Economics.
    2. 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.
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    8. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo.
    9. James E. Anderson & Eric van Wincoop, 2001. "Borders, Trade and Welfare," Boston College Working Papers in Economics 508, Boston College Department of Economics.
    10. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
    11. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
    12. 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 630-646, June.
    13. 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.
    14. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
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    Cited by:

    1. Arghya Ghosh & Peter E. Robertson & Marie-Claire Robitaille, 2016. "Does Globalisation Affect Crime? Theory and Evidence," The World Economy, Wiley Blackwell, vol. 39(10), pages 1482-1513, October.
    2. James Anderson, 2009. "Does trade foster contract enforcement?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 105-130, October.
    3. Michalopoulos, Stelios & Naghavi, Alireza & Prarolo, Giovanni, 2016. "Islam, inequality and pre-industrial comparative development," Journal of Development Economics, Elsevier, vol. 120(C), pages 86-98.
    4. James E. Anderson, 2012. "Efficient Policy In A Predatory Economy: To Him Who Hath Shall Be Given?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 157-174, February.
    5. 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.
    6. Anderson, James E., 2015. "Terrorism, trade and public policy," Research in Economics, Elsevier, vol. 69(2), pages 180-190.
    7. 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.
    8. Kenneth S. Chan & Jean‐Pierre Laffargue, 2020. "Is piracy sustainable?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 321-340, February.
    9. Timothy Besley & Thiemo Fetzer & Hannes Mueller, 2015. "The Welfare Cost Of Lawlessness: Evidence From Somali Piracy," Journal of the European Economic Association, European Economic Association, vol. 13(2), pages 203-239, April.
    10. Haggard, Stephan & Noland, Marcus, 2016. "Hard Target: Sanctions, Inducements, and the Case of North Korea," MPRA Paper 105812, University Library of Munich, Germany.
    11. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," FRB Atlanta Working Paper 2004-17, Federal Reserve Bank of Atlanta.
    12. Yang‐Ming Chang & Shih‐Jye Wu, 2020. "Insecure Resources, Bilateral Trade, and Endogenous Predation: A Game‐Theoretic Analysis of Conflict and Trade," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1338-1371, April.
    13. James E. Anderson, 2006. "Commercial Policy in a Predatory World," NBER Working Papers 12576, National Bureau of Economic Research, Inc.
    14. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(1), pages 169-191, May.
    15. James E. Anderson, 2008. "Economic Integration and the Civilising Commerce Hypothesis," The World Economy, Wiley Blackwell, vol. 31(1), pages 141-157, January.
    16. Oleg V. Pavlov & Jason M. Sardell, 2023. "Economic Origins of the Sicilian Mafia: A Simulation Feedback Model," Papers 2304.07975, arXiv.org.
    17. 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.
    18. Stephan Haggard & Marcus Noland, 2018. "Networks, Trust and Trade: The Microeconomics of China–North Korea Integration," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 277-299, September.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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