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Contract Enforcement And International Trade

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  • PRIYA RANJAN
  • JAE YOUNG LEE

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

  • Priya Ranjan & Jae Young Lee, 2007. "Contract Enforcement And International Trade," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 191-218, July.
    • Handle: RePEc:bla:ecopol:v:19:y:2007:i:2:p:191-218
    DOI: 10.1111/j.1468-0343.2007.00308.x
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    1. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
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