Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 925: Institution-Driven Comparative Advantage and Organizational Choice

Shon Ferguson () and Sara Formai
Additional contact information
Shon Ferguson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Sara Formai: Bank of Italy

Abstract: The theory of the firm suggests that firms can respond to poor contract enforcement by vertically integrating their production process. The purpose of this paper is to examine whether firms’ integration opportunities affect the way contract enforcement institutions determine international trade patterns. We find that the benefits of judicial quality for the exports of contract-intense goods are more muted in industries that have a greater propensity towards vertical integration arrangements with input suppliers. We show that our results are not driven by primitive industry characteristics. Our results confirm the role of judicial quality as source of comparative advantage and suggest that this depends not only on the technological characteristics of the goods produced but also on the way firms are able to organize the production process.

Keywords: International Trade; Comparative Advantage; Contract Enforcement; Vertical Integration

JEL-codes: D23; F10; F14; L22; L23

23 pages, September 11, 2012

Full text files

wp925.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:42.