We propose a model of trade agreements where procurement is expensive and, therefore, the optimal agreement may be incomplete. Despite its simplicity, the model provides rich predictions about the structure of the optimal trade agreement and how it depends on the fundamentals of the contractual environment. We argue that explicit consideration of contractual costs can help explain a number of key features of actual trade agreements. To submit content to your account, please confirm that you agree to comply with our Acceptable Use Policy. When you use this feature for the first time, you are prompted to allow Cambridge Core to log in to your account. Learn more about sending content to Dropbox. To send this book to your Kindle, first make sure that no-reply@cambridge.org is added to your Approved Personal Documents mailing list under Your Personal Document Settings on the Manage Content and Devices page of your Amazon account. Then enter the “Name” section of your Kindle email address below. Learn more about sending to your Kindle. Note that you can send to the @free.kindle.com or @kindle.com variant. “@free.kindle.com” emails are free, but can only be sent to your device when connected to Wi-Fi. “@kindle.com” emails can be sent even when you`re not connected to Wi-Fi, but be aware that service charges apply.
Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. “Trade Agreements as Endogenously Incomplete Contracts,” American Economic Review, American Economic Association, vol. 100(1), pp. 394-419, March. Quote courtesy of This article benefited from helpful feedback from Kyle Bagwell, Pierpaolo Battigalli, Gene Grossman, Elhanan Helpman, Robert Lawrence, Andres Rodriguez-Clare, Johan Stennek and seminar participants in Calgary, CEMFI, Ente Luigi Einaudi, Harvard, Minneapolis Fed, Penn State, Princeton, UBC, UCSD and Yale, as well as participants in an ERWIT conference and a conference at CREI (Universitat Pompeu Fabra). Horn thanks the Marianne and Marcus Wallenberg Foundation for their financial support. Maggi thanks the financial support of the NSF (SES-0351586) and thanks the duck Luigi Einaudi for the hospitality during part of this project. Staiger would like to thank the NSF for its financial support (SES-0518802). The views expressed in this document are those of the author(s) and do not necessarily reflect those of the National Bureau of Economic Research.
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