IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Relationship Specificity, Incomplete Contracts and the Pattern of Trade

  • Nathan Nunn

    (University of British Columbia)

When relationship-specific investments are necessary for production, under-investment occurs if contracts cannot be enforced. The efficiency loss from under-investment will differ across industries depending on the importance of relationship-specific investments in the production process. As a consequence, a country's contracting environment may be an important determinant of comparative advantage. To test for this, I construct measures of the efficiency of contract enforcement across countries and the importance of relationship-specific investments across industries. I find that countries with better contract enforcement specialize in industries that rely heavily on relationshipspecific investments. This is true even after controlling for traditional determinants of comparative advantage such as endowments of capital and skilled labor.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econwpa.repec.org/eps/it/papers/0512/0512018.pdf
Download Restriction: no

Paper provided by EconWPA in its series International Trade with number 0512018.

as
in new window

Length: 49 pages
Date of creation: 29 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0512018
Note: Type of Document - pdf; pages: 49
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
  2. Daniel Berkowitz & Johannes Moenius & Katharina Pistor, 2006. "Trade, Law, and Product Complexity," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 363-373, May.
  3. Masten, Scott E. & Meehan, James Jr. & Snyder, Edward A., 1989. "Vertical integration in the U.S. auto industry : A note on the influence of transaction specific assets," Journal of Economic Behavior & Organization, Elsevier, vol. 12(2), pages 265-273, October.
  4. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  6. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
  7. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  8. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing in a Global Economy?," Harvard Institute of Economic Research Working Papers 1966, Harvard - Institute of Economic Research.
  9. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2005. "Contracts and the Division of Labor," NBER Working Papers 11356, National Bureau of Economic Research, Inc.
  10. Vlachos, Jonas & Svaleryd, Helena, 2001. "Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries," SSE/EFI Working Paper Series in Economics and Finance 449, Stockholm School of Economics, revised 03 Sep 2001.
  11. repec:hrv:faseco:4784029 is not listed on IDEAS
  12. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  13. Bruce Elmslie & William Milberg, 1992. "International trade and factor intensity uniformity: An empirical assessment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(3), pages 464-486, September.
  14. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  16. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  17. Henri L.F. de Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2003. "The Institutional Determinants of Bilateral Trade Patterns," Tinbergen Institute Discussion Papers 03-044/3, Tinbergen Institute, revised 30 Oct 2003.
  18. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  19. Andrei A. Levchenko, 2004. "Institutional Quality and International Trade," IMF Working Papers 04/231, International Monetary Fund.
  20. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
  22. Keith Head & John Ries & Barbara J. Spencer, 2004. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 37-67, 03.
  23. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  24. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing versus FDI in Industry Equilibrium," NBER Working Papers 9300, National Bureau of Economic Research, Inc.
  25. Clague, Christopher, 1991. "Relative Efficiency, Self-Containment, and Comparative Costs of Less Developed Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 507-30, April.
  26. Do, Quy-Toan & Levchenko, Andrei A., 2006. "Comparative advantage, demand for external finance, and financial development," Policy Research Working Paper Series 3889, The World Bank.
  27. Puga, Diego & Trefler, Daniel, 2005. "Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries," CEPR Discussion Papers 5286, C.E.P.R. Discussion Papers.
  28. Johannes Moenius & Daniel Berkowitz, 2004. "Institutional Change and Product Composition: Does the Initial Quality of Institutions Matter?," William Davidson Institute Working Papers Series 2004-662, William Davidson Institute at the University of Michigan.
  29. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
  30. Clague, Christopher K., 1991. "Factor proportions, relative efficiency and developing countries' trade," Journal of Development Economics, Elsevier, vol. 35(2), pages 357-380, April.
  31. Masten, Scott E, 1984. "The Organization of Production: Evidence from the Aerospace Industry," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 403-17, October.
  32. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
  33. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  34. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
  35. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
  36. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  37. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
  38. Josh Lerner & Antoinette Schoar, 2005. "Does Legal Enforcement Affect Financial Transactions? The Contractual Channel in Private Equity," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 223-246, January.
  39. Donald R. Davis & David E. Weinstein, 2001. "What Role for Empirics in International Trade?," NBER Working Papers 8543, National Bureau of Economic Research, Inc.
  40. J. Ernesto Lopez-Cordova & Christopher M. Meissner, 2005. "The Globalization of Trade and Democracy, 1870-2000," NBER Working Papers 11117, National Bureau of Economic Research, Inc.
  41. Mahoney, Paul G, 2001. "The Common Law and Economic Growth: Hayek Might Be Right," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 503-25, Part I Ju.
  42. Golub, Stephen S & Hsieh, Chang-Tai, 2000. "Classical Ricardian Theory of Comparative Advantage Revisited," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 221-34, May.
  43. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  44. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade (QJE 2007) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpit:0512018. 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: (EconWPA)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.