James E. AndersonWilliam B. Neenan S.J. Millennium Professor of Economics
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Research and Teaching |
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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 |
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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. |
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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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
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.
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.
Trade and Contract Enforcement
James E. Anderson
Boston College and NBER
Leslie Young
Chinese University of Hong Kong
February 12, 2002
Abstract
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
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)
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.
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
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.
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.