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Trade and Expropriation: A Factor Proportions Approach

Author

Listed:
  • Arghya Ghosh

    (School of Economics, The University of New South Wales)

  • Peter Robertson

    (School of Economics, The University of New South Wales)

Abstract

An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.

Suggested Citation

  • Arghya Ghosh & Peter Robertson, 2008. "Trade and Expropriation: A Factor Proportions Approach," Discussion Papers 2008-19, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2008-19
    as

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    File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2008_19.pdf
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    References listed on IDEAS

    as
    1. Soares, Rodrigo R., 2004. "Development, crime and punishment: accounting for the international differences in crime rates," Journal of Development Economics, Elsevier, vol. 73(1), pages 155-184, February.
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    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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