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Two-Tier Asymmetric Information as a Motive for Trade, Trade Policies and Inefficient Trade Agreements

Author

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  • Antoine Bouet

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

  • David Laborde

    (IFPRI - International Food Policy Research Institute [Washington] - CGIAR - Consultative Group on International Agricultural Research [CGIAR])

  • David Martimort

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This theoretical paper intends to provide an explanation of the implementation of behind-the-border policies, border policies, and of the inefficiency of trade negotiations. We consider a general equilibrium model of international trade with two identical countries, two commodities, a terms-of-trade externality, and a double-tier informational problem. First, domestic producers have private information on their technology. This first layer of asymmetric information affects the design of behind-the-border policies. To reduce the information rent of those producers and ease incentive compatibility constraints, behind-the-border policies must contract domestic supply. Autarky prices are thus modified so that international trade appears. The informationally sensitive sector becomes an import sector and the more so, the greater the political influence of high-cost producers.
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Suggested Citation

  • Antoine Bouet & David Laborde & David Martimort, 2014. "Two-Tier Asymmetric Information as a Motive for Trade, Trade Policies and Inefficient Trade Agreements," Working Papers hal-02149476, HAL.
    • Handle: RePEc:hal:wpaper:hal-02149476
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    References listed on IDEAS

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