Trade, inequality, and the political economy of institutions

Quy-Toan Do and Andrei Levchenko

Journal of Economic Theory, 2009, vol. 144, issue 4, 1489-1520

Abstract: This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.

Keywords: Institutions; Entry; barriers; International; trade; Heterogeneous; firms; Political; economy (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022-0531(08)00167-1
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Trade, Inequality, and the Political Economy of Institutions (2006)
Working Paper: Trade, inequality, and the political economy of institutions (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:144:y:2009:i:4:p:1489-1520

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().