Quarterly Journal of Economics Vol. 122 No. 2 2007
Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade
open access
Abstract
Is a country's ability to enforce contracts an important determinant of comparative advantage? To answer this question, I construct a variable that measures, for each good, the proportion of its intermediate inputs that require relationship-specific investments. Combining this measure with data on trade flows and judicial quality, I find that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important. According to my estimates contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined.
- DOI
- 10.1162/qjec.122.2.569
- Volume
- 122
- Issue
- 2
- Pages
- 569-600
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref