Traders, cops and robbers |
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Authors: | James E Anderson Oriana Bandiera |
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Institution: | a Department of Economics, Boston College, Chestnut Hill, MA 02467, USA b NBER, USA c London School of Economics, UK d CEPR, UK |
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Abstract: | We propose a simple model of trade outside the law preyed on by robbers and possibly protected by private cops. We establish the conditions for trade collapse, secure trade and insecure trade. Endogenous predation and enforcement can explain both puzzling failures of commonly observed state policies against illegal trade and puzzlingly large trade responses to liberalization in licit goods. |
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Keywords: | F1 K42 |
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