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Exports and legal institutions: exploring the connection in transition economies

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  • WANCHEK, TANYA

Abstract

Secure property rights, established through court enforcement of contracts, are widely acknowledged to be fundamental to economic exchange. Despite their essential function, weak legal and judicial institutions remain the norm across much of Eastern European and former Soviet Union. Barzel (2002) hypothesizes that the value of contract trade, as opposed to relationships and reputation, increases as products travel further and are more costly to inspect. Combining Barzel's theory with the high cost of searching for foreign buyers (Rauch, 1999), this article presents evidence that international trade played a significant role in the emergence of institutions. Search costs influence the potential to export value-added, or complex, products. The level of potential complex exports in turn influences the intensity with which businesses lobby for more credible legal and juridical institutions. Both a micro-level model and empirical evidence provide evidence consistent with an endogenous link between exports and legal and judicial institutions.

Suggested Citation

  • Wanchek, Tanya, 2009. "Exports and legal institutions: exploring the connection in transition economies," Journal of Institutional Economics, Cambridge University Press, vol. 5(1), pages 89-115, April.
    • Handle: RePEc:cup:jinsec:v:5:y:2009:i:01:p:89-115_00
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    Cited by:

    1. Luigi Aldieri & Cristian Barra & Nazzareno Ruggiero & Concetto Paolo Vinci, 2023. "Corruption and firms’ efficiency: international evidence using an instrumental variable approach," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(2), pages 731-759, July.
    2. Zuzana Brixiova & Balázs Égert, 2010. "Modeling Institutions, Start-ups and Productivity during Transition," OECD Economics Department Working Papers 773, OECD Publishing.
    3. Finocchiaro Castro ,Massimo & Guccio, Calogero, 2023. "New wine in old bottle: Exploring the Corruption-inefficiency nexus using endogenous stochastic frontier approach," EconStor Preprints 275730, ZBW - Leibniz Information Centre for Economics.
    4. Candela, Rosolino A. & Piano, Ennio E., 2020. "The Art and Science of Economic Explanation: Introduction to the Special Issue in Honor of Yoram Barzel," Journal of Institutional Economics, Cambridge University Press, vol. 16(2), pages 119-126, April.

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