Cross-Cultural Trade and Institutional Stability
AbstractTraditional trade theory maintains that international economic integration always yields potential welfare benefits. This result can however be maintained only in a world bereft of its institutional and cultural dimensions. In this paper we show that, once institutional factors are introduced, integration may be detrimental to welfare. Exploiting a game theoretical approach, we consider the integration between two societies that only differ in their institutional structures. Two important results are derived. First, intercommunity integration may trigger the demise of the erstwhile internal arrangements. Second, the collapse of the domestic institutional equilibrium can lead to a loss of welfare for the community as a whole.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.
Volume (Year): 9 (2009)
Issue (Month): 1 (October)
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Web page: http://www.degruyter.com
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- Marianna Belloc & Samuel Bowles, 2009.
"International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity,"
UMASS Amherst Economics Working Papers
2009-08, University of Massachusetts Amherst, Department of Economics.
- Marianna Belloc & Samuel Bowles, 2009. "International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity," CESifo Working Paper Series 2762, CESifo Group Munich.
- Marianna Belloc & Samuel Bowles, 2010. "International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity," Levine's Working Paper Archive 661465000000000051, David K. Levine.
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