Advanced Search
MyIDEAS: Login to save this paper or follow this series

Trade, Inequality, and the Political Economy of Institutions

Contents:

Author Info

  • Andrei A. Levchenko
  • Quý Toà n Ão

Abstract

We analyze the relationship between international trade and the quality of economic institutions, such as contract enforcement, rule of law, and property rights. In our model, firms differ in their preferences for institutional quality, which is determined endogenously in a political economy framework. We show that trade opening can worsen institutions when it increases the political power of a small elite of large exporters who prefer to maintain bad institutions. The detrimental effect of trade on institutions is most likely to occur when a small country captures a sufficiently large share of world exports in sectors characterized by economic profits.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18830
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/56.

as in new window
Length: 54
Date of creation: 01 Feb 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/56

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Financial institutions; political power; political economy; institutional quality; trade opening; competition effect; international trade; domestic market; trade regimes; world trade; export markets; domestic production; trade regime; domestic firms; market equilibrium; free entry; national government; institutional change; government policy; trade openness; world market; barriers to entry; export market; impact of trade; external finance; trade expansion; domestic demand; trading partner; factor markets; import license; share of world exports; domestic economy; world economy; free labor; trade integration; imperfect competition; trading partners; exporting countries; world prices; world exports; trade costs; perfect competition; trading blocs; income distribution; factor endowments; income differences; quantitative restrictions; foreign trade; preferential access; export opportunities; political systems; food industry; domestic producers; poverty alleviation; free trade;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers, Center for Economic Studies, U.S. Census Bureau 00-08, Center for Economic Studies, U.S. Census Bureau.
  2. Ghironi, Fabio & Melitz, Marc J, 2004. "International Trade and Macroeconomic Dynamics with Heteroegenous Firms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4595, C.E.P.R. Discussion Papers.
  3. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  4. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers, Centre for Economic Performance, LSE dp0795, Centre for Economic Performance, LSE.
  5. Xavier Sala-i-Martín & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 685, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, American Economic Association, vol. 64(3), pages 291-303, June.
  7. Rigobon, Roberto & Rodrik, Dani, 2004. "Rule of Law, Democracy, Openness and Income: Estimating the Interrelationships," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4653, C.E.P.R. Discussion Papers.
  8. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, American Finance Association, vol. 60(1), pages 137-177, 02.
  9. Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "The Regulation Of Entry," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(1), pages 1-37, February.
  10. repec:rus:hseeco:122439 is not listed on IDEAS
  11. Andrei A. Levchenko, 2011. "International Trade and Institutional Change," NBER Working Papers 17675, National Bureau of Economic Research, Inc.
  12. James A. Robinson & Daron Acemoglu, 2000. "Political Losers as a Barrier to Economic Development," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 126-130, May.
  13. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  14. Ruben Segura-Cayuela, 2006. "Inefficient Policies, Inefficient Institutions and Trade," 2006 Meeting Papers, Society for Economic Dynamics 502, Society for Economic Dynamics.
  15. Simon Johnson & Jonathan D. Ostry & Arvind Subramanian, 2007. "The Prospects for Sustained Growth in Africa: Benchmarking the Constraints," NBER Working Papers 13120, National Bureau of Economic Research, Inc.
  16. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 526, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  17. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2003. "The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3712, C.E.P.R. Discussion Papers.
  18. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development among New World Economies," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  19. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 22-46, March.
  20. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
  21. Krusell, Per & Rios-Rull, Jose-Victor, 1996. "Vested Interests in a Positive Theory of Stagnation and Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 301-29, April.
  22. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  23. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 300-316, March.
  24. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 96-129, March.
  25. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
  26. Arvind Subramanian & Jonathan David Ostry & Simon Johnson, 2007. "The Prospects for Sustained Growth in Africa," IMF Working Papers 07/52, International Monetary Fund.
  27. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  28. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," NBER Working Papers 9439, National Bureau of Economic Research, Inc.
  29. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, Elsevier, vol. 75(2), pages 329-348, July.
  30. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank.
  31. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1707-21, September.
  32. Ades, Alberto & Di Tella, Rafael, 1997. "National Champions and Corruption: Some Unpleasant Interventionist Arithmetic," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(443), pages 1023-42, July.
  33. Christodoulos Stefanadis, 2010. "Appropriation, Property Rights Institutions, and International Trade," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(4), pages 148-72, November.
  34. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, World Bank Group, vol. 19(2), pages 141-174.
  35. Verdier, Thierry, 2004. "Socially Responsible Trade Integration: A Political Economy Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4699, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/56. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.