American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Trade Agreements as Endogenously Incomplete Contracts
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 394–419)
Abstract
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)Citation
Horn, Henrik, Giovanni Maggi, and Robert W. Staiger. 2010. "Trade Agreements as Endogenously Incomplete Contracts." American Economic Review, 100 (1): 394–419. DOI: 10.1257/aer.100.1.394JEL Classification
- D86 Economics of Contract: Theory
- F13 Trade Policy; International Trade Organizations