Trade and Expropriation: A Factor Proportions Approach

36 Pages Posted: 5 Jan 2009

See all articles by Arghya Ghosh

Arghya Ghosh

UNSW Australia Business School, School of Economics

Peter E. Robertson

The University of Western Australia

Date Written: July 31, 2008

Abstract

An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.

Keywords: Expropriation, Factor Proportions, Gains from Trade, Legal Services

JEL Classification: F1, K42

Suggested Citation

Ghosh, Arghya and Robertson, Peter E., Trade and Expropriation: A Factor Proportions Approach (July 31, 2008). UNSW Australian School of Business Research Paper No. 2008 ECON 19, Available at SSRN: https://ssrn.com/abstract=1323254 or http://dx.doi.org/10.2139/ssrn.1323254

Arghya Ghosh (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Peter E. Robertson

The University of Western Australia ( email )

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