WTO as Moral Support

11 Pages Posted: 27 Apr 2009

Abstract

International cooperation in trade policies under the auspices of the WTO makes countries “feel” more obliged to uphold agreements. The paper emphasizes the role of the WTO to give moral support: countries incur “psychological costs” when they renege on the agreements that are formally signed under the WTO. Using the concept of Kandori's (2003) “morale equilibrium,” we formalize this idea and show that countries can agree on a cooperative level of the binding tariffs but they occasionally deviate from the agreement, which lowers the morale and invites further deviations in the future.

Suggested Citation

Furusawa, Taiji, WTO as Moral Support. Review of International Economics, Vol. 17, Issue 2, pp. 327-337, May 2009. Available at SSRN: https://ssrn.com/abstract=1395456 or http://dx.doi.org/10.1111/j.1467-9396.2009.00827.x

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