Economic incentives and international trade
This paper studies the importance of incentives as a determinant of international trade flows. We argue that barter, countertrade and foreign direct investment can be seen as efficient institutions that mitigate contractual hazards which arise in technology trade, marketing and imperfect capital markets. Paying an import with export goods rather than cash (barter) helps to overcome incentive problems that arise in debt repayment of highly indebted countries. Payment in export goods removes the anonymity of the medium of exchange and thus allows to create a collateral for the creditor. Furthermore, tying an import with an export (countertrade) helps to solve the incentive problems related to the technology transfer to developing countries. The export flow serves as a ’hostage’ that deters cheating on the quality of the imported technology good. The predictions of the two models are consistent with the pattern of trade of actual barter and countertrade contracts.
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"Tying in International Trade: Evidence on Countertrade,"
in: New Issues in the Uruguay Round, pages 445-462
National Bureau of Economic Research, Inc.
- Dalia Marin, 1990. "Tying in International Trade: Evidence on Countertrade," The World Economy, Wiley Blackwell, vol. 13(3), pages 445-462, 09.
- Marin, Dalia, 1990. "Tying in international trade: evidence on countertrade," Munich Reprints in Economics 19226, University of Munich, Department of Economics.
- Chan, Raissa & Hoy, Michael, 1991. "East--West joint ventures and buyback contracts," Journal of International Economics, Elsevier, vol. 30(3-4), pages 331-343, May.
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