Trade Agreements as Endogenously Incomplete Contracts
Giovanni Maggi, and
Robert W. Staiger. 2010. "Trade Agreements as Endogenously Incomplete Contracts."
American Economic Review,
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)
Article Full-Text Access
Horn, Henrik (Research Institute of Industrial Economics, Stockholm)
Maggi, Giovanni (Yale U)
Staiger, Robert W. (Stanford U)
D86: Economics of Contract: Theory
F13: Trade Policy; International Trade Organizations