creator: Anderson, James E.
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Mafias as Enforcers
description- – Historical evidence suggests that Mafias originally formed to provide enforcement of legitimate property rights when state enforcement was weak. We provide a general equilibrium model of Mafias as enforcement coalitions which protect property from predators. Both the level of predation and the type of enforcement ³ self-enforcement, specialized competitive enforcement and Mafia enforcement ³ are endogenous. We identify the conditions under which a coalition emerges and persists and show that Mafias are most likely to be found at intermediate stages of economic development. We also show that Mafias might provide better enforcement to the rich than would a welfare-maximizing state, suggesting a difficulty in the emergence and persistence of state provision of enforcement.
- – WP480
- – 2000-10-25
- – application/pdf
Trade Implies Law: The Power of the Weak
description- – Without the rule of law, traders who incur trading costs can be held up by counter-parties who are stronger in anarchic bargaining. The favourable terms which the latter extract can overcrowd that side of the market, dissipating the benefits. We establish plausible necessary and sufficient conditions for a move from anarchy toward the rule of law to benefit all traders. The rule of law might be delayed, not only by the difficulties of setting up legal institutions, but by monopolistic traders that have meantime emerged to address the inefficiencies of anarchic trade. These monopolistic traders must also guarantee atomistic traders against holdup.
- – WP475
- – 2000-03-30
- – application/pdf
Gravity with Gravitas: A Solution to the Border Puzzle
description- – The gravity model has been widely used to infer substantial trade flow effects of institutions such as customs unions and exchange rate mechanisms. McCallum [1995] found that the US-Canada border led to trade between provinces that was a factor 22 (2,200%) times trade between states and provinces, a spectacular puzzle in light of the low formal barriers on this border. We show that the gravity model usually estimated does not correspond to the theory behind it. We solve the"border puzzle"by applying the theory seriously. We find that national borders reduce trade between the US and Canada by about 40%, while reducing trade among other industrialized countries by about 30%. The spectacular McCallum headline number is the result of a combination of omitted variables bias and the small size of the Canadian economy.
- – WP485
- – 2000-12-01
- – application/pdf
Does Trade Foster Contract Enforcement?
description- – Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development.
- – WP672
- – 2007-06-19
- – application/pdf
Borders, Trade and Welfare
subject- – WP508
- – 2001-09-08
- – application/pdf
Political Pressure Deflection
description- – Much economic policy is deliberately shifted away from direct political processes to administrative processes - political pressure deflection. Pressure deflection poses a puzzle to standard political economy models which suggest that having policies to 'sell' is valuable to politicians. The puzzle is solved here by showing that incumbents will favor pressure deflection since it can deter viability of a challenger, essentially like entry deterrence. U.S. trade policy since 1934 provides a prime example, especially antidumping law and its evolution.
- – 2004-02-01
- – application/pdf
Costs of Taxation and the Benefits of Public Goods: The Role of Income Effects
description- – The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify very much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. We confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation- and will provide the same result- as long as the income effects of both taxes and public good provision are incorporated in a consistent manner.
- – WP617
- – 2005-09-08
- – application/pdf
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