Trade, Inequality, and the Political Economy of Institutions
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.
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| Main Authors: | , |
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| Format: | Journal Article biblioteca |
| Language: | EN |
| Published: |
2009
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| Subjects: | Institutions: Design, Formation, and Operations D020, Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D720, Neoclassical Models of Trade F110, Trade Policy, International Trade Organizations F130, Production, Pricing, and Market Structure, Size Distribution of Firms L110, |
| Online Access: | http://hdl.handle.net/10986/5668 |
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