James E. Anderson

William B. Neenan S.J. Millennium Professor of Economics

 


Tel: 617.552.3691
Fax: 617.552.2308
Email: james.anderson.1@bc.edu

 

Office: 21 Campanella Way, Rm. 471

Spring 2008 office hours:

M 4:30-5:30, W 10:30-11:30 or by appointment

 

Biographical Sketch:

Research and Teaching:



 
 

Research and Teaching

Research Interests: International Trade, Political Economy, Micro Theory and applications, Economic History and Development. Teaching: International Trade, Political Economy and American Economic History.
Research Downloads
recent and current research
Class Downloads
Includes syllabi for courses

Useful Links

Economics Department website
contains other downloadable research.
WTO Policy Reviews
Global Trade Negotiations site.
A very useful Harvard site for trade policy information.
Institute for International Economics briefs
Often useful policy briefs.

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Biographical Sketch

B.A., Oberlin College            Ph.D., University of Wisconsin

I have made numerous contributions to the theory of international trade and trade policy. See my curriculum vitae for details. Like most economists, I am a convinced liberal trader. For a discussion of why this is so despite sympathy for poor people who may be harmed by trade, see my essay for the New Palgrave Dictionary of Economics. In the last decade I have focused on index numbers of trade policy. (How high are trade barriers, understanding that there are thousands of them?) My book with Peter Neary (MIT Press, Dec. 2005) integrates and extends this work. Most recently I have focused on other forms of trade barriers which are implicitly visible in trade patterns. One line of research focuses on insecurity and trade. (How much does  predation, corruption and poor enforceability of contract limit trade? How do institutions evolve to enable and secure trade?) This line has led me into a parallel research on Mafias. Another line of research focuses on better inference about implicit trade costs using the gravity model and my economic theory of gravity (AER, 1979). Various papers in these lines of research are abstracted below and available for downloading from research downloads.

I currently serve on the Editorial Board of the Review of International Economics, and have recently served on the Editorial Boards of the Journal of International Economics and the American Economic Review. I am a Research Associate of the National Bureau of Economic Research and appear in Who's Who in Economcs, 3rd Edition. In 1999 I received a Boston College Distinguished Senior Research Award. In 2004 I was appointed William B. Neenan Millenium Professor of Economics at Boston College, the Economics Department's first endowed chair.

I enjoy tennis, running, biking and skiing, especially Nordic. In quieter moments of leisure I consume quantities of novels, biographies and histories. My current favorite recommendation as a mind-expanding book for anyone is Paul Seabright's The Company of Strangers . In the same big picture history line I also recommend Fernand Braudel's The Wheels of Commerce, William McNeill's The Rise of the West and Joel Mokyr's The Lever of Riches. For really big picture speculative fiction my favorite is Olaf Stapledon's classic Last and First Men.

As an undergraduate I thought of becoming an historian, a taste which survives in my occasionally teaching undergraduate economic history and will emerge someday in research.

My home page on the Economics Department website has more information, and other downloadable research and software. The Department website has many excellent and interesting links.
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ABSTRACTS



THE MERCANTILIST INDEX OF TRADE POLICY*
 

 James E. Anderson
 Boston College and NBER

 and

 J. Peter Neary
 University College Dublin

 March 6, 1998
 Revised September 6, 1999

May 2003 International Economic Review.
 

 Abstract

 This paper develops and characterizes an index of trade policy restrictiveness defined as the uniform tariff equivalent which maintains the same volume of trade as a given set of tariffs, quotas, and domestic taxes and subsidies.  We relate this volume-equivalent index to the Trade Restrictiveness Index, a welfare-equivalent measure, and to the trade weighted average tariff  Applications to international cross-section and time-series comparisons of trade policy show that the new index frequently gives a very different picture than do standard indexes.
 

JEL:  F13

Keywords:  International trade policy; tariffs; quotas; Trade Restrictiveness Index; trade liberalisation.
 #research downloads


Autarky and Anarchy: Endogneous Predation and Trade

James E. Anderson                     Douglas Marcouiller, S.J.
Boston College and NBER                       Boston College

International Economic Review (2005), 46,189-213.
Abstract

This paper offers a general equilibrium model in which a common and analytically "clean" transactions cost --- that which arises from exposure to theft --- is endogenously determined by forward-looking, utility-mazimizing individuals.  Insecurity dramatically restricts specialization and trade, affects the welfare of the trading partners asymmetrically, and reflects the state of institutions for risk-sharing and coordination of defense. We show that anarchy presumptively implies autarky. The model provides an excellent framework for understanding the collapse of trade between Spain and its American colonies and may also apply to many contemporary forms of corruption.

This paper reflects helpful comments from participants in seminars at the University of Konstanz, Pompeu Fabra University, Ludwig Maximilian University (Munich), the London School of Economics, the University of Notre Dame, the Latin American and Caribbean Economic Association, the Midwest International Economics Group, and the NBER Summer Institute. Anderson acknowledges the hospitality of the NBER and the Institute for International Economic Studies, Stockholm, during work on this paper.
 

JEL: F10
 #research downloads


Private Enforcement and Social Efficiency

 

James E. Anderson   
Oriana Bandiera
Boston College and NBER
London School of Economics and CEPR

 

                
                    

Journal of Development Economics (2005), 77, 341-66.
 
 

Abstract

This paper makes precise the distributional consequences and social
efficiency of private enforcement of property rights. We develop a model
where properties of different values are subject to predatory attacks and
owners must choose between self-defense and purchasing private enforcement
services. A distributional conflict of interest arises as private protection
purchased by rich owners deflects predators on low value properties.
We show that the market structure of private enforcement and the level of
development affect the distribution of property income through relative
changes in the security of high and low values property. We also show that
privately provided enforcement can be higher than its socially optimal level
because of the negative externality that enforcers and their rich customers
impose on poorer owners. The availability of private enforcement may then
constrain the enforcement policy of a welfare maximizing State.

Keywords: enforcement, predation, informal sector. JEL Classification: H11, H42, K42.
 

 #research downloads


Political Pressure Deflection
 

 James E. Anderson
 Boston College and NBER

 Maurizio Zanardi
 Tilburg University
 

Abstract

Much economic policy is deliberately shifted away from direct political processes to administrative processes --- political pressure (group) 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. US trade policy since 1934 provides a prime example, especially antidumping law and its evolution.
 December 2002. Prepared for the Econometric Society meetings, Jan. 2003.
 

 #research downloads


Trade and Contract Enforcement
 

James E. Anderson                     Boston College and NBER
Leslie Young                   Chinese University of Hong Kong

February 12, 2002
 

Abstract

We model imperfect contract enforcement when repudiators and their victims default to spot trading. The interaction between the contract and spot markets under improved enforcement can exacerbate repudiation and reduce contract execution, harming all traders. Improved contract execution benefits traders on the excess side of the spot market by attracting potential counter-parties, but harms them by impeding their exit from contracts found to be unfavorable. Multiple equilibria and multiple optima are possible, with anarchy a local optimum, perfect enforcement a local minimum and imperfect enforcement a global optimum. LDCs exhibit parameter combinations such that imperfect enforcement is optimal. This paper started when Anderson visited the Chinese University of Hong Kong, whose support and hospitality is gratefully acknowledged. An earlier version was presented to the NBER Summer Institute, August, 1999 and to the Econometric Society, Jan. 2000.
 

 #research downloads


Trade Costs

James E. Anderson* and Eric van Wincoop**

Journal of Economic Literature, (2004), 42, 691-751.

Abstract

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
large. The ad valorem tax equivalent is about 170% when pushing the data
very hard. Poor countries face even higher trade costs. There is a lot of
variation across countries and across goods within countries, much of which
makes economic sense. Theory looms large in our survey, providing
interpretation and perspective on the one hand and suggesting improvements
for the future on the other hand. Some new results are presented to apply
and interpret gravity theory properly and to handle aggregation
appropriately.
 

* Economics Department, Boston College and NBER, Chestnut Hill, MA 02467, USA, Tel: 617-552-3691,e-mail: James.Anderson.1@bc.edu
** Department of Economics, University of Virginia, e-mail: vanwincoop@virginia.edu

.
 #research downloads



Political Market Structure
*

James E. Anderson and Thomas J. Prusa

Abstract

Many political markets are essentially uncontested, in the sense that one candidate raises little (or no) money and consequently has little chance of election. This presents a puzzle in the presence of apparently low barriers to entry. Using a variant of Baron~(1989) we provide a theory encompassing both contested and uncontested markets. The essential addition is the presence of fixed costs of campaigning. We show that these may be quite small and yet constitute decisive barriers to entry.  (100 words)

 #research downloads



Gravity with Gravitas: A Solution to the Border Puzzle*

 James E. Anderson
 Boston College and NBER

 Eric van Wincoop
 Federal Reserve Bank of New York
 October, 2001
 

 Abstract

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. Revised version of NBER WP 8079; October, 2001. American Economic Review March 2003.
JEL:  F10, F13

Keywords: Gravity model; border effects; trade liberalization.
 #research downloads
 


Why Do Nations Trade (So Little)?

James E. Anderson

This paper calling for a research program on missing trade costs was delivered as the Jao Lecture to the Hong Kong Economics Association and published in the Pacific Economic Review in 2002. Several correspondents have asked me to post it again because their libraries do not receive this journal. The paper poses empirical puzzles having to do with trade costs and presents some promising directions for research, some of which I have carried on in the last few years. These appear as other papers on this site.

 #research downloads


 

Borders, Trade and Welfare
 James E. Anderson
 Boston College and NBER

 Eric van Wincoop
 Federal Reserve Bank of New York
August, 2001
Published in the Brookings TradeForum 2001, Jan. 2002.

We find that international economic integration has large potential welfare effects, even in a static constant returns competitive world economy. Our method has elements of novelty. The effect of border barriers on trade flows is often inferred from gravity models. But their rather atheoretic structure precludes welfare analysis. Computable general equilibrium models are designed for tight welfare analysis, but lack econometric foundation and are often black boxes. Our method combines these approaches. We show that gravity models based on Anderson's (1979) interpretation are full general equilibrium models of a special simple sort. In Anderson and van Wincoop (NBER WP 8079, 2001) we develop this structure to estimate and calculate the comparative static effects on trade flows of border barriers. In this paper we further deploy the model to explore the comparative statics of welfare with respect to borders, to currency unions and to NAFTA.  Our NAFTA exercise does a much better job of replicating the actual trade flow changes than do the main computable general equilibrium models. An interesting implication of gravity models is that terms of trade changes are very important, even for 'small' countries such as Mexico.

JEL classification: F0

 #research downloads


Trade and Informal Institutions
James E. Anderson
November, 2001
This chapter surveys recent work on informal institutions and trade. Trade barriers other than tariffs, quotas and transport costs are apparently very large even between developed countries such as the US and Canada. Nations exhibit wide variation in their use of informal institutions in trade, suggesting complex relations between formal and informal institutions and the volume of trade. New institutional economic research on informal institutions and trade attempts to explain these phenomena. The institutions presumptively lower trade costs but impose costs of their own. Informal institutions presumptively substitute for but may complement formal institutions. Better institutions are not always in every trader's interest. Published in Handbook of International Trade, Vol. 2, James Hartigan and E. Kwan Choi, eds., Oxford: Blackwell Publishing, 2005, pp. 279-93.
 #research downloads

Traders, Cops and Robbers
James E. Anderson     Oriana Bandiera
October, 2002

Revised, August, 2004






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.

Journal of International Economics, forthcoming.

JEL Classification: F1, K42

An earlier version was presented to the Peace Science Society meetings, Atlanta, GA, Jan. 2002, at Brown University and at the LSE. We are indebted to Hong-bin Cai, Herschel Grossman, Evi Pappa and Steve Redding for helpful comments on earlier versions and to Jonathan Eaton and a referee for greatly improving this version.
 
 
 #research downloads



  Insecurity and the Pattern of Trade: An Empirical Investigaton

James E. Anderson

Douglas Marcouiller, S.J.

Corruption and imperfect contract enforcement dramatically reduce international trade. This paper estimates the reduction using a structural model of import demand in which insecurity acts as a hidden tax on trade. We find that inadequate institutions constrain trade as much as tariffs do. We also find that omitting indexes of institutional quality biases typical gravity model estimates, obscuring a negative relationship between per capita income and the share of total expenditure devoted to traded goods. Finally, we argue that cross-country variation in the effectiveness of institutions and consequent variation in the prices of traded goods offer a simple explanation for the stylized fact that high-income, capital-abundant countries trade disproportionately with each other. Review of Economics and Statistics, May 2002.
 
  #research downloads



  Welfare vs. Market Access: the Implications of Tariff Structure for Tariff Reform

James E. Anderson

J. Peter Neary

February, 2006

We show that the effects of tariff changes on welfare and import volume can be fully characterized by their effects on the generalized mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two "cones of liberalization" in price space. Because welfare is negatively but import volume positively related to the generalized variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalized and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

Journal of International Economics, forthcoming.

JEL classification: F13

Keywords: piecemeal policy reform, market access, concertina rule, uniform radial cut rule.
 

 #research downloads
 


Measuring Trade Restrictiveness

James E. Anderson

J. Peter Neary

August, 2004

Our work over the last decade and more on index numbers of trade policy is integrated in this book. Earlier work has been extensively rewritten to provide common treatment of a wide range of distortions. We provide introductory material on the analytics of economies with trade distortions and extend the analysis to other types of distortions. The wide range of applications assembled in this book provides a foundation for future efforts to measure trade restrictiveness in a wide range of settings.

Published by MIT Press, December, 2005. More details.

#research downloads