Although there is mounting empirical evidence that the mere presence of borders contribute to reduce trade significantly, there is no firm view on what are the reasons underlying this phenomenon. This paper investigates the role played by asymmetries in judicial systems in driving the "border effect". First, we provide evidence that differences in the judicial system matter for the volume of trade flows. Variables capturing the extent of asymmetries in the procedures to settle trade litigations perform significantly in estimation both across OECD countries and across French regions. Second, we develop a matching model of trade showing that such asymetries in the legal system fragment trade through a mechanism which is essentially different compared with that of transport costs or formal trade barriers.

We re-examine the efficiency of observable and unobservable crime protection decisions with new results and insights. Observable protection is unambiguously associated with a negative externality. At the individual level, it reduces the crime effort, but its unit payoff remains unchanged. Conversely, unobservable protection reduces the unit payoff and has no effect on the crime effort exerted, though it deters crime globally. A decrease in the global crime payoff is detrimental to a victim if protection is observable, while it is beneficial when unobservable. While observable protection has a positive diversion effect, it has the opposite effect when unobservable.

In this paper, we analyze the trade war between two large countries when the trade policy is decided through majority voting. We show how the distributive aspect of trade policy interacts with the strategic aspect. It is shown that the voting equilibrium depends on the distribution of the factor endowment. If median voters in each country own relatively more (less) than the aggregate economy of the factor used intensively in the production of the imported good, the tariffs outcome of the trade war at home (abroad) is larger (lower) than the Johnson-Mayer one. This is to say that the strategic effects from trade policy can be isolated from the distributive aspect. Moreover, an increase of the median of the scarce/abundant factor distribution in one country leads to a larger tariff in this country and a lower tariff in the other. This implies that the political situation in one country affects the outcome of the trade war for both.

This paper presents a fiscal competition model in which policy decisions are not only corporate taxes but also whether or not to control the multinational firms'(MNF) profit shifting activities. MNFs manipulate transfer prices as a means to shift profits from high to low tax countries. National governments may hinder such a behavior by monitoring the MNF's accounts. We show that a country may optimally decide not to monitor the MNF for two different reasons. On the one hand, that makes it anattractive location for the MFN even if the corporate tax is high. On the other hand, not monitoring increases the mobility of the MFN's profits. This shifts the focus of tax competition in that corporate taxation then influences not only the MNF's location as the place where it declares its profits.