TY  - JOUR
AU  - Anderson,James E.
TI  - Traders, Cops and Robbers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9572
PY  - 2003
Y2  - March 2003
UR  - http://www.nber.org/papers/w9572
L1  - http://www.nber.org/papers/w9572.pdf
N1  - Author contact info:
James E. Anderson
Department of Economics
Boston College
Chestnut Hill, MA 02467
Tel: 617/552-3691
Fax: 617/552-2308
E-Mail: james.anderson.1@bc.edu
AB  - 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.
ER  -