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Arbitration in International Trade

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  • Casella, Alessandra

Abstract

The great majority of international contracts provide for arbitration in the event of dispute. Legal scholars argue that international arbitration is causing the development of a legal doctrine attuned to the needs of business and independent of national laws. This paper studies international arbitration as a prime example of private trade shaping international institutions. The provisions and the practice of international arbitration are reviewed, and a general equilibrium model of the relationship between the expansion of international trade and the adoption of arbitration is presented. The model focuses on the heterogeneity of economic agents in terms of their legal needs. It shows how arbitration alters the size and composition of markets, while at the same time responding to exogenous changes in trade. In addition, it shows how the legal services provided by the courts deteriorate in the presence of arbitration, predicting that the share of traders using arbitration should rise as markets expand. Overall, the model does remarkably well in generating results commonly discussed in the legal literature.

Suggested Citation

  • Casella, Alessandra, 1992. "Arbitration in International Trade," CEPR Discussion Papers 721, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:721
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    References listed on IDEAS

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    1. Paul R. Milgrom & Douglass C. North & Barry R. Weingast*, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, March.
    2. Alessandra Casella & Jonathan S. Feinstein, 1990. "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions," NBER Working Papers 3554, National Bureau of Economic Research, Inc.
    3. Barry Eichengreen., 1992. "The Political Economy of Fiscal Policy After EMU," Center for International and Development Economics Research (CIDER) Working Papers C92-004, University of California at Berkeley.
    4. Jeff Frankel, Steve Phillips, and Menzie Chinn., 1992. "Financial and Currency Integration in the European Monetary System: The Statistical Record," Center for International and Development Economics Research (CIDER) Working Papers C92-005, University of California at Berkeley.
    5. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-121, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Arbitration; Institutions; International Integration;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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