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Tying, Risk-Sharing, and `Lock-In': An Investigation of Countertrade Contracts

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  • Marin, Dalia

Abstract

The paper sees countertrade - the tying of trade flows - as an insurance contract that mitigates contractual hazards and reduces the incentive for ex post `hold-up' when parties are `locked' in a relationship after they have made specific investment. This way tying is seen as a commitment device against renegotiation during contract execution when investments are sunk. Moreover, tying is seen as an institutional setting that is effective in securing technology spillovers from developed countries to Eastern Europe (PCPEs) and LDCs. Based on a sample of 230 countertrade contracts signed between firms in OECD countries and PCPEs and LDCs in the period 1984-8, this view of countertrade is found to be consistent with the data.

Suggested Citation

  • Marin, Dalia, 1992. "Tying, Risk-Sharing, and `Lock-In': An Investigation of Countertrade Contracts," CEPR Discussion Papers 673, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:673
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    More about this item

    Keywords

    Contract Theory; Countertrade; Eastern Europe; Trade Policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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