Economic incentives and international trade
AbstractThis paper studies the importance of incentives as a determinant of international trade flows. We argue that barter, countertrade and foreign direct investment can be seen as efficient institutions that mitigate contractual hazards which arise in technology trade, marketing and imperfect capital markets. Paying an import with export goods rather than cash (barter) helps to overcome incentive problems that arise in debt repayment of highly indebted countries. Payment in export goods removes the anonymity of the medium of exchange and thus allows to create a collateral for the creditor. Furthermore, tying an import with an export (countertrade) helps to solve the incentive problems related to the technology transfer to developing countries. The export flow serves as a âhostageâ that deters cheating on the quality of the imported technology good. The predictions of the two models are consistent with the pattern of trade of actual barter and countertrade contracts.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 42 (1998)
Issue (Month): 3-5 (May)
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Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Dalia Marin & Monika Schnitzer, 1997. "Economic Incentives and International Trade," CIG Working Papers FS IV 97-24, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Marin, Dalia & Schnitzer, Monika, 1998. "Economic incentives and international trade," Munich Reprints in Economics 19262, University of Munich, Department of Economics.
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