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Breach, Remedies and Dispute Settlement in Trade Agreements

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  • Giovanni Maggi
  • Robert W. Staiger

Abstract

We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out."

Suggested Citation

  • Giovanni Maggi & Robert W. Staiger, 2009. "Breach, Remedies and Dispute Settlement in Trade Agreements," NBER Working Papers 15460, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15460
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    References listed on IDEAS

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    12. Beshkar, Mostafa, 2010. "Optimal remedies in international trade agreements," European Economic Review, Elsevier, vol. 54(3), pages 455-466, April.
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    14. Steven Shavell, 2003. "Economic Analysis of Property Law," NBER Working Papers 9695, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kohler, Wilhelm & Stähler, Frank, 2019. "The economics of investor protection: ISDS versus national treatment," Journal of International Economics, Elsevier, vol. 121(C).
    2. Phillip McCalman & Frank Stähler & Gerald Willmann, 2019. "Contingent trade policy and economic efficiency," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 227-255, May.

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    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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