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Efficient Policy In A Predatory Economy: To Him Who Hath Shall Be Given?

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  • James E. Anderson

Abstract

Trade subject to predation generates externalities within and between markets. Efficient tax, infrastructure, and enforcement policies internalize the net externality—more trade implies fewer predators but drawn to trade at rising cost. The balance is positive (negative) as enforcement is weak (strong). Dual economies pair weak Periphery and strong Core enforcement markets. Efficient taxation and infrastructure promote the Core at the expense of the Periphery. Efficient enforcement promotes both. Tolerance (intolerance) of smuggling is efficient when Core enforcement is weak (strong). Tolerance of informal market Mafias that provide enforcement and infrastructure is efficient when Core enforcement is strong.

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  • James E. Anderson, 2012. "Efficient Policy In A Predatory Economy: To Him Who Hath Shall Be Given?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 157-174, February.
    • Handle: RePEc:wly:iecrev:v:53:y:2012:i:1:p:157-174
    DOI: j.1468-2354.2011.00675.x
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    1. Abhijit V. Banerjee & Andrew F. Newman, 1998. "Information, the Dual Economy, and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(4), pages 631-653.
    2. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, February.
    3. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.
    4. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    5. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
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    4. Anderson, James & Vesselovsky, Mykyta & Yotov, Yoto, 2014. "Gravity with Scale Economies," School of Economics Working Paper Series 2014-4, LeBow College of Business, Drexel University.

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