Size inequality, coordination externalities and international trade agreements
By: Nuno Limao, Kamal Saggi
Contributors: Saggi, Kamal; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17603; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17603.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Developing countries now account for a significant fraction of both world trade and two thirds of the membership of the World Trade Organization (WTO).  However, many are still individually small and thus have a limited ability to bilaterally extract and enforce trade concessions from larger developed economies even though as a group they would be able to do so.  We show that this coordination externality generates asymmetric outcomes under agreements that rely on bilateral threats of trade retaliation.  such as the WTO.  but not under agreements extended to include certain financial instruments.  In particular, we find that an extended agreement generates improvements in global efficiency and equity if it Includes the exchange of bonds prior to trading but not if it relies solely on ex-post fines.  Moreover, a combination of bonds and fines generates similar improvements even if small countries are subject to financial constraints that prevent them from posting bonds"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 1/17/2012.

Includes bibliographical references.

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Mode of access: World Wide Web.