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Does Trade Foster Contract Enforcement?

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  • James E. Anderson

Abstract

Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development.

Suggested Citation

  • James E. Anderson, 2008. "Does Trade Foster Contract Enforcement?," NBER Working Papers 14045, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14045
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    Cited by:

    1. Tereza Nìmeèková & Arshad Hayat, 2022. "Does trade openness improve the quality of domestic institutions? Evidence from Africa," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(4), pages 881-908, December.
    2. Gani, Azmat & Clemes, Michael D., 2016. "Does the strength of the legal systems matter for trade in insurance and financial services?," Research in International Business and Finance, Elsevier, vol. 36(C), pages 511-519.
    3. Daniel Bernhofen & Raymond Riezman, 2009. "Introduction: ‘New directions in international trade theory’," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 1-3, October.
    4. Azmat Gani, 2018. "Contract Enforcement and Trade," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 107-119, March.
    5. Ben Li & Penglong Zhang, 2016. "International Geopolitics," Boston College Working Papers in Economics 909, Boston College Department of Economics, revised 06 Feb 2017.
    6. Dixit, Avinash, 2015. "Governance, trade, and investment," Research in Economics, Elsevier, vol. 69(2), pages 166-179.
    7. Xiaohuan Lan & Ben G. Li, 2015. "The Economics of Nationalism," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 294-325, May.
    8. Ma, Yue & Qu, Baozhi & Zhang, Yifan, 2010. "Judicial quality, contract intensity and trade: Firm-level evidence from developing and transition countries," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 146-159, June.
    9. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions?," Open Access publications 10197/7587, School of Economics, University College Dublin.
    10. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions? An Empirical Assessment," Review of Economics and Institutions, Università di Perugia, vol. 2(2).
    11. Thorsten Koeppl & Cyril Monnet & Erwan Quintin, 2014. "Efficient contract enforcement," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 161-183, January.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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