Contractual Frictions and the Margins of Trade
A growing body of work has shown that the quality of national institutions that enforce written contracts plays an important role in shaping a country's comparative advantage. Using highly disaggregated bilateral and unique harmonized firm-lev...
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/940871540912581932/Contractual-Frictions-and-the-Margins-of-Trade http://hdl.handle.net/10986/30652 |
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okr-10986-306522021-06-08T14:42:48Z Contractual Frictions and the Margins of Trade Azomahou, Theophile T. Maemir, Hibret B. Wako, Hassen A. COMPARATIVE ADVANTAGE INSTITUTIONS CONTRACTS EXPORT MARGIN OF TRADE CONTRACT LAW EXPORT COMPETITIVENESS TRADE PROMOTION A growing body of work has shown that the quality of national institutions that enforce written contracts plays an important role in shaping a country's comparative advantage. Using highly disaggregated bilateral and unique harmonized firm-level trade data across a large number of countries, this paper contributes to this literature by providing a comprehensive analysis of the mechanisms through which institutional frictions affect the pattern of aggregate trade flow, distinguishing the effects on the intensive and extensive margins. The analysis finds that contractual friction distorts countries' trade pattern beyond its effect on domestic production structure, by deterring the probability of exporting (the extensive margin) and export sales after entry (the intensive margin), particularly in industries that rely more heavily on relationship-specific inputs (more vulnerable to holdup problems). The analysis also finds that contractual frictions matter more for the intensive margin than the extensive margin of exporting. In addition, better contracting institutions increase the probability of survival of new export products in more contract-intensive industries. These results have important policy implications for developing countries that seek to boost export growth but many of which suffer from poor contracting institutions. 2018-11-01T21:10:39Z 2018-11-01T21:10:39Z 2018-10 Working Paper http://documents.worldbank.org/curated/en/940871540912581932/Contractual-Frictions-and-the-Margins-of-Trade http://hdl.handle.net/10986/30652 English Policy Research Working Paper;No. 8631 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
COMPARATIVE ADVANTAGE INSTITUTIONS CONTRACTS EXPORT MARGIN OF TRADE CONTRACT LAW EXPORT COMPETITIVENESS TRADE PROMOTION |
| spellingShingle |
COMPARATIVE ADVANTAGE INSTITUTIONS CONTRACTS EXPORT MARGIN OF TRADE CONTRACT LAW EXPORT COMPETITIVENESS TRADE PROMOTION Azomahou, Theophile T. Maemir, Hibret B. Wako, Hassen A. Contractual Frictions and the Margins of Trade |
| relation |
Policy Research Working Paper;No. 8631 |
| description |
A growing body of work has shown that
the quality of national institutions that enforce written
contracts plays an important role in shaping a
country's comparative advantage. Using highly
disaggregated bilateral and unique harmonized firm-level
trade data across a large number of countries, this paper
contributes to this literature by providing a comprehensive
analysis of the mechanisms through which institutional
frictions affect the pattern of aggregate trade flow,
distinguishing the effects on the intensive and extensive
margins. The analysis finds that contractual friction
distorts countries' trade pattern beyond its effect on
domestic production structure, by deterring the probability
of exporting (the extensive margin) and export sales after
entry (the intensive margin), particularly in industries
that rely more heavily on relationship-specific inputs (more
vulnerable to holdup problems). The analysis also finds that
contractual frictions matter more for the intensive margin
than the extensive margin of exporting. In addition, better
contracting institutions increase the probability of
survival of new export products in more contract-intensive
industries. These results have important policy implications
for developing countries that seek to boost export growth
but many of which suffer from poor contracting institutions. |
| format |
Working Paper |
| author |
Azomahou, Theophile T. Maemir, Hibret B. Wako, Hassen A. |
| author_facet |
Azomahou, Theophile T. Maemir, Hibret B. Wako, Hassen A. |
| author_sort |
Azomahou, Theophile T. |
| title |
Contractual Frictions and the Margins of Trade |
| title_short |
Contractual Frictions and the Margins of Trade |
| title_full |
Contractual Frictions and the Margins of Trade |
| title_fullStr |
Contractual Frictions and the Margins of Trade |
| title_full_unstemmed |
Contractual Frictions and the Margins of Trade |
| title_sort |
contractual frictions and the margins of trade |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/940871540912581932/Contractual-Frictions-and-the-Margins-of-Trade http://hdl.handle.net/10986/30652 |
| _version_ |
1764472535355752448 |