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Cross-Cultural Trade and Institutional Stability

Listed author(s):
  • Belloc Marianna

    ()

    (Sapienza University of Rome)

Traditional trade theory maintains that international economic integration always yields potential welfare benefits. This result can however be maintained only in a world bereft of its institutional and cultural dimensions. In this paper we show that, once institutional factors are introduced, integration may be detrimental to welfare. Exploiting a game theoretical approach, we consider the integration between two societies that only differ in their institutional structures. Two important results are derived. First, intercommunity integration may trigger the demise of the erstwhile internal arrangements. Second, the collapse of the domestic institutional equilibrium can lead to a loss of welfare for the community as a whole.

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Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 9 (2009)
Issue (Month): 1 (October)
Pages: 1-25

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Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:34
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