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Breach, Remedies and Dispute Settlement in Trade Agreements

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Author Info
Giovanni Maggi () (Cowles Foundation, Yale University)
Robert W. Staiger (Dept. of Economics, Stanford University)

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Abstract

We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out."

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File URL: http://cowles.econ.yale.edu/P/cd/d17a/d1735.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1735.

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Length: 52 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:cwl:cwldpp:1735

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: International trade agreements; Breach remedies; Dispute settlement;

Other versions of this item:

Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Susan Athey, 2002. "Monotone Comparative Statics Under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 187-223, February. [Downloadable!] (restricted)
  2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  3. Martin, Alberto & Vergote, Wouter, 2008. "On the role of retaliation in trade agreements," Journal of International Economics, Elsevier, vol. 76(1), pages 61-77, September. [Downloadable!] (restricted)
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  4. Schwartz, Warren F & Sykes, Alan O, 2002. "The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization," Journal of Legal Studies, University of Chicago Press, vol. 31(1), pages S179-204, January.
  5. Kyle Bagwell & Robert W. Staiger, 2005. "Enforcement, Private Political Pressure and the Gatt/Wto Escape Clause," Discussion Papers 0405-13, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
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This page was last updated on 2009-12-1.

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