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...

Corruption and imperfect contract enforcement dramatically reduce trade. This paper estimates the reduction, using a structural model of import demand in which transactions costs impose a price markup on traded goods. We find that inadequate institutions constrain trade far more than tariffs do....

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...

Market exchange is subject to an endogenously determined level of predation which impedes specialization and gains from trade. We construct a model in which utility-maximizing agents opt between careers in production and careers in predation. Three types of equilibria may emerge: autarky (with...

This paper rehabilitates effective protection. The usual definition of the effective rate of protection is the percentage change in value added per unit induced by the tariff structure. The problem is that in general equilibrium this measure corresponds to no economically interesting magnitude....

This paper surveys the measurement of trade costs - what we know, and what we don't know but may usefully attempt to find out. Partial and incomplete data on direct measures of costs go together with inference on implicit costs from trade flows and prices. Total trade costs in rich countries are...

The theory of trade reform typically is based on a passive government budget constraint, in which changes in tariff revenue are costlessly offset by lump sum transfers. This paper offers a general framework for trade reform when the government budget constraint is active, such that tariff...

Anti-dumping is often defended as a pressure valve which reduces more illiberal forms of protectionist pressure. In the domino dumping model of Anderson (1992, 1993) this need not be true as exporters dump to obtain market access in the event of a VER. The contribution of this paper is to show...

Insecurity impedes trade. Using a variant of the gravity model (the workhorse of empirical international economics) Anderson and Marcouiller (1999) showed that transparent government policies and enforceable commercial contracts significantly reduce trade costs and increase trade volume. This...