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Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies

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  • Koichi Hamada
  • Shyam Sunder

Abstract

This paper studies the role of transfers among groups within a country as well as among countries in a two level game of international trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less likely that a nation would find it individually rational to participate as a member of an international institution. Costly transfers render the internal and international adjustment difficult, and serve as a barrier to trade liberalization. Costly international transfers harden the resistance against trade liberalization in the (potentially) recipient country and soften it in the (potentially) donor country.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2360.

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Date of creation: 01 May 2005
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Handle: RePEc:ysm:somwrk:amz2360

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Keywords: International trade; tariff negotiation; asymmetric information; transfer; WTO common agency; two-level game;

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  1. Saijo, Tatsuyoshi & Yamato, Takehiko, 1999. "A Voluntary Participation Game with a Non-excludable Public Good," Journal of Economic Theory, Elsevier, vol. 84(2), pages 227-242, February.
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  12. Murray C. Kemp & Paul Pezanis-Christou, 1999. "Pareto's compensation principle," Social Choice and Welfare, Springer, vol. 16(3), pages 441-444.
  13. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  14. Hoff, Karla & Lyon, Andrew B., 1995. "Non-leaky buckets: Optimal redistributive taxation and agency costs," Journal of Public Economics, Elsevier, vol. 58(3), pages 365-390, November.
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  16. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
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