Corruption and imperfect contract enforcement dramatically reduce trade. This paper estimates the reduction, using a structural model of import demand in which transactions costs impose a price markup on traded goods. We find that inadequate institutions constrain trade far more than tariffs do. We...

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Bibliographic Details

Main Authors:	Anderson, James E. 1943- (Author), Marcouiller, Douglas (Author)
Format:	Book
Language:	English
Published:	Cambridge, Mass. 1999
Series:	National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 7000
Subjects:	Commerce international - Modèles économétriques Commerce international - Pratiques déloyales - Modèles économétriques Contrats - Modèles économétriques Coût de transaction - Modèles économétriques Vol (droit) - Aspect économique - Modèles économétriques Ökonometrisches Modell Contracts > Economic aspects > Econometric models International trade > Corrupt practices > Econometric models International trade > Econometric models Markup > Econometric models Theft > Economic aspects > Econometric models Transaction costs > Econometric models
Online Access:	Volltext
Summary:	Corruption and imperfect contract enforcement dramatically reduce trade. This paper estimates the reduction, using a structural model of import demand in which transactions costs impose a price markup on traded goods. We find that inadequate institutions constrain trade far more than tariffs do. We also find that omitting indexes of institutional quality from the model leads to an underestimate of home bias. Using a broad sample of countries, we find that the traded goods expenditure share declines significantly as income per capita rises, other things equal. Cross-country variation in the effectiveness of institutions offers a simple explanation of the observed global pattern of trade, in which high-income, capital-abundant countries trade disproportionately with one another.
Physical Description:	30 S.