Contract Enforcement and International Trade

28 Pages Posted: 26 Jun 2007

See all articles by Priya Ranjan

Priya Ranjan

University of California, Irvine - Department of Economics

Jae Young Lee

Ministry of Finance and Economy - South Korea

Abstract

This paper derives estimating equations from a model where individuals consume two classes of goods, and the degree of contract enforcement affects the transaction cost of trade in the two classes of goods differentially. Empirically, using Rauch's classification, internationally traded goods are classified into differentiated goods and those possessing a reference price, with the presumption that contract enforcement issues are more important for the former. It is verified that the measures of contract enforcement affect the volume of trade in both types of goods, but the impact is larger for differentiated goods.

Suggested Citation

Ranjan, Priya and Lee, Jae Young, Contract Enforcement and International Trade. Economics & Politics, Vol. 19, No. 2, pp. 191-218, July 2007. Available at SSRN: https://ssrn.com/abstract=995307 or http://dx.doi.org/10.1111/j.1468-0343.2007.00308.x

Priya Ranjan (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

Jae Young Lee

Ministry of Finance and Economy - South Korea ( email )

Korea, Republic of (South Korea)

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