IDEAS home Printed from https://ideas.repec.org/p/edn/sirdps/253.html
   My bibliography  Save this paper

Transaction Costs and Institutions

Author

Listed:
  • Nolan, Charles
  • Trew, Alex

Abstract

This paper proposes a simple framework for understanding endogenous transaction costs - their composition, size and implications. In a model of diversification against risk, we distinguish between investments in institutions that facilitate exchange and the costs of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues.

Suggested Citation

  • Nolan, Charles & Trew, Alex, 2011. "Transaction Costs and Institutions," SIRE Discussion Papers 2011-11, Scottish Institute for Research in Economics (SIRE).
  • Handle: RePEc:edn:sirdps:253
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10943/253
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martins-da-Rocha, Victor Filipe & Vailakis, Yiannis, 2008. "Endogenous Transaction Costs," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 680, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    2. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    3. Pol Antràs & Esteban Rossi-Hansberg, 2009. "Organizations and Trade," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 43-64, May.
    4. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    5. V. Martins-da-Rocha & Yiannis Vailakis, 2010. "Financial markets with endogenous transaction costs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 65-97, October.
    6. Robert M. Townsend & Kenichi Ueda, 2006. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 251-293.
    7. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, pages 916-943.
    8. Robert M. Townsend & Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth; A Model-Based Quantitative Evaluation," IMF Working Papers 03/193, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Exchange costs; transaction costs; general equilibrium; institutions;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edn:sirdps:253. 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: (Research Office). General contact details of provider: http://edirc.repec.org/data/sireeuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.