Traders, Cops and Robbers∗

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. JEL Classification: F1, K42

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Cite this paper

@inproceedings{Anderson2005TradersCA, title={Traders, Cops and Robbers∗}, author={James E Anderson and Oriana Bandiera}, year={2005} }