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Trade Agreements as Endogenously Incomplete Contracts

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Author Info
Henrik Horn
Giovanni Maggi
Robert W. Staiger

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Abstract

We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12745.

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Date of creation: Dec 2006
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Handle: RePEc:nbr:nberwo:12745

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Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
F1 - International Economics - - Trade
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration
F51 - International Economics - - International Relations and International Political Economy - - - International Conflicts; Negotiations; Sanctions
F53 - International Economics - - International Relations and International Political Economy - - - International Agreements and Observance; International Organizations
F59 - International Economics - - International Relations and International Political Economy - - - Other

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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. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December. [Downloadable!] (restricted)
  2. Maggi, Giovanni & Rodriguez-Clare, Andres, 2005. "A Political-Economy Theory of Trade Agreements," CEPR Discussion Papers 5321, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, And International Economic Institutions," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 519-562, May. [Downloadable!] (restricted)
    Other versions:
  4. Costinot, Arnaud, 2008. "A comparative institutional analysis of agreements on product standards," Journal of International Economics, Elsevier, vol. 75(1), pages 197-213, May. [Downloadable!] (restricted)
    Other versions:
  5. Horn, Henrik, 2006. "National Treatment in the GATT," Working Paper Series 657, Research Institute of Industrial Economics. [Downloadable!]
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  6. repec:att:wimass:1920423 is not listed on IDEAS
  7. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February. [Downloadable!] (restricted)
  8. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, vol. 80(4), pages 779-95, September. [Downloadable!] (restricted)
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  9. Pierpaolo Battigalli & Giovanni Maggi, 2002. "Rigidity, Discretion, and the Costs of Writing Contracts," American Economic Review, American Economic Association, vol. 92(4), pages 798-817, September. [Downloadable!]
  10. 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!]
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  11. Pierpaolo Battigalli & Giovanni Maggi, 2003. "International agreements on product standards: an incomplete-contracting theory," Working Papers 229, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  12. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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. Bown, Chad P. & Bernard M., Hoekman, 2007. "Developing countries and enforcement of trade agreements : why dispute settlement is not enough," Policy Research Working Paper Series 4450, The World Bank. [Downloadable!]
    Other versions:
  2. Horn, Henrik & Mavroidis, Petros C., 2008. "The Permissible Reach of National Environmental Policies," Working Paper Series 739, Research Institute of Industrial Economics, revised 20 Jun 2008. [Downloadable!]
  3. Sergei Guriev & Mikhail Klimenko, 2007. "Duration and Term Structure of Trade Agreements," Working Papers WP13_2007_09, Laboratory for Macroeconomic Analysis. [Downloadable!]
  4. INABA Masaru & NUTAHARA Kengo, 2009. "The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting," Discussion papers 09030, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
    Other versions:
  5. JINJI Naoto, 2009. "An Economic Theory of the SPS Agreement," Discussion papers 09033, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  6. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Towards Non-Members?," CEP Discussion Papers dp0868, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  7. Giovanni Maggi & Robert W. Staiger, 2008. "On the Role and Design of Dispute Settlement Procedures in International Trade Agreements," NBER Working Papers 14067, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Itai Agur, 2007. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Economics Working Papers ECO2007/17, European University Institute. [Downloadable!]
    Other versions:
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