Cross-Cultural Trade and Internal Institutional Stability
Traditional trade theory obtains that international integration always yields large potential welfare benefits, even in a static constant returns competitive economy. Such a result however can only be maintained in a world bereft of its institutional and cultural dimensions. In this paper we show that once institutional factors are introduced into the discussion, integration may be detrimental to welfare in the long-run. 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 we illustrate that intercommunity integration may entail the disruption of the pre-existent internal arrangements in at least one of the two societies. This is crucial especially because in our model institutional diversity is the only reason that makes intercommunity integration profitable. Second, in the presence of gains from internal cooperation, the collapse of the domestic institutional equilibrium leads to a loss of welfare for the community as a whole.
|Date of creation:||07 Jul 2005|
|Date of revision:|
|Contact details of provider:|| Postal: F502 Haas, Berkeley CA 94720-1922|
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_econ/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Greif, Avner, 1994. "On the Political Foundations of the Late Medieval Commercial Revolution: Genoa During the Twelfth and Thirteenth Centuries," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 271-287, June.
- James E. Rauch & Vitor Trindade, 1999.
"Ethnic Chinese Networks in International Trade,"
NBER Working Papers
7189, National Bureau of Economic Research, Inc.
- John Shuhe Li, 2003. "Relation-based versus Rule-based Governance: an Explanation of the East Asian Miracle and Asian Crisis," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 651-673, 09.
- Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
- Schmitz, Hubert, 1999. "From ascribed to earned trust in exporting clusters," Journal of International Economics, Elsevier, vol. 48(1), pages 139-150, June.
- Paul Collier & Marcel Fafchamps & Francis Teal & Stefan Dercon, 1999.
"Contract flexibility and dispute resolution in African manufacturing,"
Economics Series Working Papers
WPS/1999-20, University of Oxford, Department of Economics.
- Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns Soderbom & Francis Teal & Albert Zeufack, 2000. "Contract flexibility and dispute resolution in African manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 36(4), pages 1-37.
- Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns Söderbom & Francis Teal & Albert Zeufack, 1999. "Contract Flexibility and Dispute Resolution in African Manufacturing," CSAE Working Paper Series 1999-20, Centre for the Study of African Economies, University of Oxford.
- Casella, Alessandra & Rauch, James E, 1997.
"Anonymous Market and Group Ties in International Trade,"
CEPR Discussion Papers
1748, C.E.P.R. Discussion Papers.
- Casella, Alessandra & Rauch, James E., 2002. "Anonymous market and group ties in international trade," Journal of International Economics, Elsevier, vol. 58(1), pages 19-47, October.
- Alessandra Casella & James E. Rauch, 1997. "Anonymous Market and Group Ties in International Trade," NBER Working Papers 6186, National Bureau of Economic Research, Inc.
- Parikshit Ghosh & Debraj Ray, 1996.
"Cooperation in Community Interaction Without Information Flows,"
Review of Economic Studies,
Oxford University Press, vol. 63(3), pages 491-519.
- Parikshit Ghosh & Debraj Ray, 1995. "Cooperation in Community Interaction Without Information Flows," Boston University - Institute for Economic Development 64, Boston University, Institute for Economic Development.
- Bowles, Samuel & Gintis, Herbert, 2004. "Persistent parochialism: trust and exclusion in ethnic networks," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 1-23, September.
- Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August.
- James E. Rauch & Alessandra Casella, 2003.
"Overcoming Informational Barriers to International Resource Allocation: Prices and Ties,"
Royal Economic Society, vol. 113(484), pages 21-42, January.
- Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
- Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 202-31, April.
- North, Douglass C., 1993.
"Economic Performance through Time,"
Nobel Prize in Economics documents
1993-2, Nobel Prize Committee.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Woodruff, Christopher, 1998. "Contract enforcement and trade liberalization in Mexico's footwear industry," World Development, Elsevier, vol. 26(6), pages 979-991, June.
- Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
- Dani Rodrik, 2000. "Trade Policy Reform as Institutional Reform," IDB Publications (Working Papers) 8750, Inter-American Development Bank.
- Curtin,Philip D., 1984. "Cross-Cultural Trade in World History," Cambridge Books, Cambridge University Press, number 9780521269315, November.
- Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
- Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
- Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
When requesting a correction, please mention this item's handle: RePEc:cdl:econwp:qt1wj7v0sn. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.