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Traders, cops and robbers

Anderson, James E. and Bandiera, Oriana (2003) Traders, cops and robbers. . National Bureau of Economic Research, Cambridge, MA., USA.

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Why does illegal trade often flourish without formal enforcement, but sometimes fail? Why do illegal tradereducing 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.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2003 James E. Anderson and Oriana Bandiera
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 07 May 2008 16:11
Last Modified: 26 Dec 2020 00:29

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