Inefficient Policies, Inefficient Institutions and Trade
AbstractDespite the general belief among economists on the growth-enhancing role of international trade and significant trade opening over the past 25 years, the growth performance of many developing economies, especially of those in Latin America and Africa, has been disappointing. While this poor growth performance has many potential causes, in this paper I argue that part of the reason may be related to the interaction between weak institutions and trade. In particular, I construct a model in which trade opening in societies with weak institutions (in particular autocratic and elite-controlled political systems) may lead to worse economic policies. The reason is that general equilibrium price effects of taxation and expropriation in closed economies also hurt the elites, and this puts a natural barrier against inefficient policies. Trade openness removes this barrier and enables groups with political power to exercise this power in more inefficient ways
Download InfoIf 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.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 502.
Date of creation: 03 Dec 2006
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Trade; Institutions; Expropriation;
Other versions of this item:
- Rubén Segura-Cayuela, 2006. "Inefficient policies, inefficient institutions and trade," Banco de Espaï¿½a Working Papers 0633, Banco de Espa�a.
- F10 - International Economics - - Trade - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-01-13 (Africa)
- NEP-ALL-2007-01-13 (All new papers)
- NEP-INT-2007-01-13 (International Trade)
- NEP-POL-2007-01-13 (Positive Political Economics)
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.:
- Gino Gancia & Paolo Epifani, 2007.
"On Globalization and the Growth of Governments,"
2007 Meeting Papers
217, Society for Economic Dynamics.
- Paolo Epifani & Gino Gancia, 2008.
"Openness, Government Size and the Terms of Trade,"
IEW - Working Papers
359, Institute for Empirical Research in Economics - University of Zurich.
- Persson, T. & Tabellini, G., 1993.
"Is Inequality Harmful for Growth,"
537, Stockholm - International Economic Studies.
- Bourguignon, F. & Verdier, T., 1999.
"Is Financial Openness bad for Education? A Political Economy Perspective on Development,"
DELTA Working Papers
1999-20, DELTA (Ecole normale supérieure).
- Bourguignon, Francois & Verdier, Thierry, 2000. "Is financial openness bad for education? A political economy perspective on development," European Economic Review, Elsevier, vol. 44(4-6), pages 891-903, May.
- Robert E. Hall & Charles I. Jones, 1999.
"Why Do Some Countries Produce So Much More Output per Worker than Others?,"
NBER Working Papers
6564, National Bureau of Economic Research, Inc.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
- Jeffrey Sachs & Andrew Warner, 1995.
"Economic Reform and the Progress of Global Integration,"
Harvard Institute of Economic Research Working Papers
1733, Harvard - Institute of Economic Research.
- Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Wacziarg, Romain & Welch, Karen Horn, 2003.
"Trade Liberalization and Growth: New Evidence,"
1826, Stanford University, Graduate School of Business.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
NBER Working Papers
7771, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
- Andrei A. Levchenko & QuÃ½ ToÃ n Ão, 2006.
"Trade, Inequality, and the Political Economy of Institutions,"
IMF Working Papers
06/56, International Monetary Fund.
- Do, Quy-Toan & Levchenko, Andrei A., 2009. "Trade, inequality, and the political economy of institutions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1489-1520, July.
- Do, Quy-Toan & Levchenko, Andrei A., 2006. "Trade, inequality, and the political economy of institutions," Policy Research Working Paper Series 3836, The World Bank.
- Easterly, William & Levine, Ross, 1997.
"Africa's Growth Tragedy: Policies and Ethnic Divisions,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(4), pages 1203-50, November.
- Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
- Andrei A. Levchenko, 2004.
"Institutional Quality and International Trade,"
IMF Working Papers
04/231, International Monetary Fund.
- François Bourguignon & Thierry Verdier, 2005.
"The Political Economy of Education and Development in an Open Economy,"
Review of International Economics,
Wiley Blackwell, vol. 13(3), pages 529-548, 08.
- François Bourguignon & Thierry Verdier, 2001. "The Political Economy of Education and Development in an Open Economy," DELTA Working Papers 2001-11, DELTA (Ecole normale supérieure).
- Bourguignon, François & Verdier, Thierry, 2001. "The Political Economy of Education and Development in an Open Economy," CEPR Discussion Papers 3075, C.E.P.R. Discussion Papers.
- Dani Rodrik, 1998. "Trade Policy and Economic Performance in Sub-Saharan Africa," NBER Working Papers 6562, National Bureau of Economic Research, Inc.
- Rubén Segura-Cayuela, 2006.
"Inefficient policies, inefficient institutions and trade,"
Banco de Espaï¿½a Working Papers
0633, Banco de Espa�a.
- Ruben Segura-Cayuela, 2006. "Inefficient Policies, Inefficient Institutions and Trade," 2006 Meeting Papers 502, Society for Economic Dynamics.
- Galor, Oded & Mountford, Andrew, 2006.
"Trade and the Great Divergence: The Family Connection,"
CEPR Discussion Papers
5490, C.E.P.R. Discussion Papers.
- Oded Galor & Andrew Mountford, 2006. "Trade and the Great Divergence: The Family Connection," American Economic Review, American Economic Association, vol. 96(2), pages 299-303, May.
- Oded_Galor & Andrew Mountford, 2006. "Trade and the Great Divergence: The Family Connection," Working Papers 2006-01, Brown University, Department of Economics.
- Verdier, Thierry, 2004. "Socially Responsible Trade Integration: A Political Economy Perspective," CEPR Discussion Papers 4699, C.E.P.R. Discussion Papers.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Christian Zimmermann).
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.