Trade Agreements As Endogenously Incomplete Contracts

We propose a model of trade agreements for which the allocation is costly and, therefore, the optimal agreement may be incomplete. Despite its simplicity, the model provides rich predictions about the structure of the optimal trade agreement and how it depends on the foundations of the contractual environment. We argue that explicit consideration of contract costs can help explain a number of key features of genuine trade agreements. Henrik Horn – Giovanni Maggi – Robert W. Staiger, 2010. “Trade Agreements as Endogenly Incomplete Contracts,” American Economic Review, American Economic Association, 100 (1), pages 394-419, March. If you have written this article and are not yet registered with RePEc, we advise you to do so here. This way, you can link your profile to this item. It also allows you to accept possible quotes on this article of which we are not sure. Access to this document is limited, so you should look for another version or version below. If CitEc has recognized a reference but has not linked an element of RePEc to it, you can use this form to help you. If you know the missing items that are using them, you can help us create those links by adding the corresponding references in the same way as above for each reference item. If you are a registered author of this article, you can also check the “Quotes” tab in your RePEc Author service profile, as some quotes may wait for confirmation.

This document made useful comments from Kyle Bagwell, Pierpaolo Battigalli, Gene Grossman, Elhanan Helpman, Robert Lawrence, Andres Rodriguez-Clare, Johan Stennek and seminar participants in Calgary, Cemfi, Ente Luigi Einaudi, Harvard, Minneapolis Fed, Penn State, Princeton, UBC, UCSD and Yale, as well as participants in an ERWIT conference and a conference at CREI (Universe Fabout). Horn appreciates the financial support of the Marianne and Marcus Wallenberg Foundation. Maggi thanked the NSF (SES-0351586) for its financial support and thanked Duck Luigi Einaudi for the hospitality he showed during part of this project. Staiger welcomes the financial support of the NSF (SES-0518802). The views expressed in this section are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. Please note that the correction may take a few weeks to filter out the various RePEc services.