NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Commercial Policy in a Predatory World

James E. Anderson

NBER Working Paper No. 12576
Issued in October 2006
NBER Program(s):   ITI   DAE

Mutual causation of predation and trade induces novel effects of commercial policy in this paper. The model can explain trade volume responses to market widening initiatives that are otherwise puzzlingly 'too big' or 'too small'. Efficient commercial policy (broadly defined) depends crucially on the strength of enforcement. Externalities arising between traders are normally internalized by subsidizing (taxing) trade when enforcement is weak (strong). Efficient regional policy squeezes weak enforcement markets while subsidizing strong enforcement markets. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong).

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This paper was revised on June 27, 2008

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Document Object Identifier (DOI): 10.3386/w12576

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