Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies

37 Pages Posted: 16 May 2005

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Koichi Hamada

Yale University - Department of Economics

Date Written: May 2005

Abstract

This paper studies the role of transfers among groups within a country as well as among countries in a two level game of international trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less likely that a nation would find it individually rational to participate as a member of an international institution. Costly transfers render the internal and international adjustment difficult, and serve as a barrier to trade liberalization. Costly international transfers harden the resistance against trade liberalization in the (potentially) recipient country and soften it in the (potentially) donor country.

Keywords: International trade, tariff negotiation, asymmetric information, transfer, WTO common agency, two-level game

JEL Classification: O82, F13, H21, H71, H77

Suggested Citation

Sunder, Shyam and Hamada, Koichi, Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies (May 2005). Yale University Economic Growth Center Discussion Paper No. 910; Yale ICF Working Paper No. 05-15. Available at SSRN: https://ssrn.com/abstract=722628

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Koichi Hamada (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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