Institutional Quality and International Trade

December 1, 2004

Preview Citation

Format: Chicago

Andrei A Levchenko. Institutional Quality and International Trade, (USA: International Monetary Fund, 2004) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The quality of institutions-meaning the quality of contract enforcement, property rights, shareholder protection, and the like-has received a great deal of attention in recent years. The purposes of this paper are twofold. First, it studies the consequences of trade when institutional differences are the source of comparative advantage among countries. Institutional differences are modeled within the Grossman-Hart-Moore framework of contract incompleteness. It is shown, among other things, that the less developed country may not gain from trade, and that factor prices may actually diverge as a result of trade. Second, the paper provides empirical evidence of "institutional content of trade:" institutional differences are shown to be important determinant of trade flows.

Subject: Capital productivity, Comparative advantage, Imports, International trade, Labor, Production, Trade balance

Keywords: Base wage, Capital abundance, Capital intensity, Capital productivity, Comparative advantage, Global, Imports, Incomplete contracts, Institutions, Labor interest group, Physical capital, Trade balance, Trade economist, Trade equilibrium, Trade methodology, Trade opening, Trade outcome, Trade pattern, Trade patterns, Trade value, Trade volume, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/231
Stock No:

WPIEA2312004
ISBN:

9781451875560
ISSN:

1018-5941

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