Working Paper: NBER ID: w24251
Authors: James E. Anderson
Abstract: States with weak institutions (South) can lose from institutional response to trade with North. A Ricardian model of trade subject to predation characterizes the case. South labor earns equal returns in production and predation. Institutions are needed for security improvement because equilibrium predation is invariant to globalization and productivity rises, contrary to casual intuition. Enforcement reduces predation with terms of trade effects that typically imply opposing North-South interests. Trade also incentivizes institutional regime change to counter or control predation. North para-state institutions gain by promoting corrupt South institutions – Mafias or their state equivalents – over welfarist South states.
Keywords: No keywords provided
JEL Codes: F13; F16; O17; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Weak institutions in the South (O17) | Predatory behavior (C92) |
| Predatory behavior (C92) | Trade outcomes (F14) |
| Institutional enforcement (D02) | Predation (Q57) |
| Weak institutions in the South (O17) | Trade losses (F14) |
| Institutional enforcement (D02) | Trade security (F52) |
| Trade (F19) | Institutional regime change (O17) |
| Institutional regime change (O17) | Trade security (F52) |
| Enforcement mechanisms (K40) | Gains from trade (F11) |