Working Paper: NBER ID: w26230
Authors: David Atkin; Amit K. Khandelwal
Abstract: Substantial research in development economics has highlighted the presence of weak institutions, market failures and distortions in developing countries. Yet, much of the knowledge generated in international trade comes from workhorse models that abstract from these frictions. This review summarizes the recent literature that assesses how these characteristics interact (or may interact) with trade reforms, resulting in different impacts in developing countries relative to what we would expect in developed countries. We discuss understudied areas that warrant further research.
Keywords: international trade; developing countries; market failures; weak institutions
JEL Codes: F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Weak institutions (O17) | Significant tariff evasion (H26) |
| Significant tariff evasion (H26) | Alters expected revenue from tariffs (H29) |
| Weak institutions (O17) | Affects distribution of benefits from trade policies (F61) |
| Weak contract enforcement (D86) | Reduces gains from trade (F11) |
| Weak contract enforcement (D86) | Distorts trade patterns (F14) |
| Weak institutions (O17) | Less likelihood of engaging in complex trade relationships (F19) |
| Weak institutions (O17) | Exporting goods that require less relationship-specific investment (F10) |
| Trade (F19) | Improve regulatory enforcement in developing countries (O25) |
| Trade (F19) | Reallocations of labor into sectors with poor working conditions (J89) |