2006–2010

Trade Agreements as Endogenously Incomplete Contracts

Reprint No. 2010:13

Author(s): Henrik Horn, Giovanni Maggi and Robert W. StaigerYear: 2010 Title: American Economic Review Volume (No.): 100 (1) Pages: 394–419
Online article (restrictions may apply)


We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements. (JEL D86, F13)


Reference:
Horn, Henrik, Giovanni Maggi and Robert W. Staiger (2010), "Trade Agreements as Endogenously Incomplete Contracts". American Economic Review 100(1), 394–419.

Henrik Horn

Contact

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henrik.horn@ifn.se

Elgar Companion to

Social Capital and Health

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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