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Governance, trade, and investment

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  • Dixit, Avinash

Abstract

Imperfections in the rule of law create new problems of contractibility, in addition to the familiar one of unverifiability of information. Alternative social institutions for governance of property and contract arise but are also imperfect, and can interact well or poorly with the formal state institutions. Security of property and contract is especially problematic for foreign traders and investors. This paper considers some theoretical analysis of such situations. The game-theoretic ideas and methods range from simple two-stage games with strategic moves to bilateral and multilateral repeated games with added issues of asymmetric information and imperfect communication.

Suggested Citation

  • Dixit, Avinash, 2015. "Governance, trade, and investment," Research in Economics, Elsevier, vol. 69(2), pages 166-179.
  • Handle: RePEc:eee:reecon:v:69:y:2015:i:2:p:166-179
    DOI: 10.1016/j.rie.2014.08.001
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    References listed on IDEAS

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    1. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-894, July.
    2. Kobrin, Stephen J., 1987. "Testing the bargaining hypothesis in the manufacturing sector in developing countries," International Organization, Cambridge University Press, vol. 41(04), pages 609-638, September.
    3. Avinash Dixit, 2009. "Governance Institutions and Economic Activity," American Economic Review, American Economic Association, vol. 99(1), pages 5-24, March.
    4. Pol Antràs & Esteban Rossi-Hansberg, 2009. "Organizations and Trade," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 43-64, May.
    5. Javorcik, Beata S. & Wei, Shang-Jin, 2009. "Corruption and cross-border investment in emerging markets: Firm-level evidence," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 605-624, June.
    6. repec:mes:jeciss:v:30:y:1996:i:4:p:1212-1216 is not listed on IDEAS
    7. Anderson James E & Young Leslie, 2006. "Trade and Contract Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-36, November.
    8. James Anderson, 2009. "Does trade foster contract enforcement?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 105-130, October.
    9. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    10. Avinash Dixit, 2011. "International Trade, Foreign Direct Investment, and Security," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 191-213, September.
    11. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," Working Papers 080921, University of California-Irvine, Department of Economics.
    12. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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    Cited by:

    1. Garfinkel, Michelle R. & Syropoulos, Constantinos, 2015. "Trade openness and the settlement of domestic disputes in the shadow of the future," Research in Economics, Elsevier, vol. 69(2), pages 191-213.
    2. Etro, Federico, 2015. "Research in economics and political economy," Research in Economics, Elsevier, vol. 69(3), pages 261-264.

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