Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 226: Redirecting International Trade: Contracts, Conflicts, and Institutions

Ari Kokko (), Bengt Söderlund () and Patrik Gustavsson Tingvall ()
Additional contact information
Ari Kokko: Copenhagen Business School and Ratio
Bengt Söderlund: Stockholm School of Economics and Ratio, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Patrik Gustavsson Tingvall: Ratio, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: The global financial crisis has accelerated the redirection of trade towards new markets, outside the OECD area, where both demand patterns and the institutional environment differ from those in the OECD. This study provides an empirical examination of the consequences of this shift. Results suggest that weak institutions hamper trade and reduces the length of trade relations, especially for small firms. Furthermore, trade in industries that are characterized by a high degree of trade conflicts and that requires extensive relationship specific investments for trade to occur are comparatively difficult to redirect towards markets with weak institutions.

Keywords: Exports; Offshoring; Trade; Institutions; Conflicts; Contracts

JEL-codes: F23; F55; K00; P48

33 pages, December 4, 2013

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