Transaction costs and institutions

Charles Nolan and Alex Trew

Working Papers from Business School - Economics, University of Glasgow

Abstract: This paper proposes a simple framework for understanding endogenous transaction costs - their composition, size and implications. In a model of diversification against risk, we distinguish between inverstments in instituations that facilitate exchange and the costs of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction cost are exogenous, including the implications for taxation and measurement issues.

Keywords: Exchange costs; transaction costs; general equilibrium; institutions. (search for similar items in EconPapers)
JEL-codes: D02 D51 L14 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Transaction Costs and Institutions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2011_14

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