Trade and Expropriation: A Factor Proportions Approach

Arghya Ghosh and Peter Robertson

No 2008-19, Discussion Papers from School of Economics, The University of New South Wales

Abstract: An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.

Keywords: Expropriation; Factor Proportions; Gains from Trade; Legal Services (search for similar items in EconPapers)
JEL-codes: F1 K42 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-10
New Economics Papers: this item is included in nep-int and nep-law
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