Traders, Cops and Robbers

James Anderson

No 9572, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F1 K42 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-law and nep-mic
Note: ITI
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Citations: View citations in EconPapers (3)

Published as Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.

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