Transaction costs and institutions
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 inverstments in instituations 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 cost are exogenous, including the implications for taxation and measurement issues.
|Date of creation:||Jan 2011|
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- 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).
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- 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.
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- 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)
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