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Does Trade Foster Contract Enforcement?

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  • James E. Anderson

    (Boston College
    NBER)

Abstract

Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development.

Suggested Citation

  • James E. Anderson, 2007. "Does Trade Foster Contract Enforcement?," Boston College Working Papers in Economics 672, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:672
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    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
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    7. James E. Anderson, 2008. "Economic Integration and the Civilising Commerce Hypothesis," The World Economy, Wiley Blackwell, vol. 31(1), pages 141-157, January.
    8. repec:ags:afjare:141665 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Daniel Bernhofen & Raymond Riezman, 2009. "Introduction: ‘New directions in international trade theory’," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 1-3, October.
    2. Tereza Nìmeèková & Arshad Hayat, 2022. "Does trade openness improve the quality of domestic institutions? Evidence from Africa," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(4), pages 881-908, December.
    3. Gani, Azmat & Clemes, Michael D., 2016. "Does the strength of the legal systems matter for trade in insurance and financial services?," Research in International Business and Finance, Elsevier, vol. 36(C), pages 511-519.
    4. Azmat Gani, 2018. "Contract Enforcement and Trade," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 107-119, March.
    5. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions? An Empirical Assessment," Review of Economics and Institutions, Università di Perugia, vol. 2(2).
    6. Xiaohuan Lan & Ben G. Li, 2015. "The Economics of Nationalism," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 294-325, May.
    7. Ben Li & Penglong Zhang, 2016. "International Geopolitics," Boston College Working Papers in Economics 909, Boston College Department of Economics, revised 06 Feb 2017.
    8. Ma, Yue & Qu, Baozhi & Zhang, Yifan, 2010. "Judicial quality, contract intensity and trade: Firm-level evidence from developing and transition countries," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 146-159, June.
    9. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions?," Open Access publications 10197/7587, School of Economics, University College Dublin.
    10. Dixit, Avinash, 2015. "Governance, trade, and investment," Research in Economics, Elsevier, vol. 69(2), pages 166-179.
    11. Thorsten Koeppl & Cyril Monnet & Erwan Quintin, 2014. "Efficient contract enforcement," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 161-183, January.

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    More about this item

    Keywords

    trade; contract enforcement; institutional development;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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