Working Paper Series
Trade Agreements as Endogenously Incomplete Contracts
(), Giovanni Maggi and Rikard W. Staiger
Abstract: We propose a model of trade agreements in which
contracting is costly, and as a consequence the optimal agreement may be
incomplete. Inspite of its simplicity, the model yields rich predictions on
the structure of the optimal trade agreement and how this depends on the
fundamentals of the contracting environment. We argue that taking
contracting costs explicitly into account can help explain a number of key
features of real trade agreements.
Keywords: Trade Agreement; WTO; GATT; Endogenously Incomplete Contracts; (follow links to similar papers)
JEL-Codes: D86; F13; K33; (follow links to similar papers)
50 pages, January 3, 2007
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