Commercial Policy in a Predatory World [report]

James Anderson
2006 unpublished
Predation -extortion or theft -imposes significant, sometimes prohibitive, costs on trade. Mutual causation of predation and trade can explain trade volume responses to liberalization that are otherwise puzzlingly 'too big' or 'too small'. Intensive margin responses are larger the weaker is enforcement while extensive margin responses are larger the stronger is enforcement. Efficient commercial policy in this setting should subsidize (tax) trade when enforcement is weak (strong). The
more » ... ng). The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong). The switch from weak to strong enforcement explains the switch from tolerance to intolerance by British policy toward its North American colonies after 1763. JEL Classification: F13, O17, K42.
doi:10.3386/w12576 fatcat:4pq6rnqptvh53m7x4hnwrfyzpu