Recurrent trade agreements and the value of external enforcement

Klimenko, Mikhail M.; Ramey, Garey; Watson, Joel

doi:10.1016/j.jinteco.2007.07.004

Cited by 46 publications

(18 citation statements)

References 35 publications

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“…(Recent theoretical papers include Ederington 2001;Bond & Park 2002;Chisik 2003;Agur 2008;Bagwell & Staiger 2003, 2005aLimao 2005;Lee 2007;Zissimos 2007;Klimenko et al 2008;Martin & Vergote 2008;Bagwell 2009;Beshkar 2009;Park 2009;and Limao & Saggi 2008. Related empirical work includes Prusa &Skeath 2001 andBlonigen &Bown 2003.…”

Section: Enforcement and Dispute Settlement Proceduresmentioning

confidence: 99%

The World Trade Organization: Theory and Practice

Bagwell

Staiger

2010

Annu. Rev. Econ.

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We consider the purpose and design of the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT), and review recent developments in the relevant theoretical and empirical literature. We describe the GATT/WTO architecture and briefly trace its historical antecedents. We suggest that the existing literature provides a useful framework for understanding and interpreting central features of the design and practice of the GATT/WTO, and we identify key unresolved issues.WTO, GATT, trade agreements, terms-of-trade theory

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Section: Enforcement and Dispute Settlement Proceduresmentioning

confidence: 99%

The World Trade Organization: Theory and Practice

Bagwell

Staiger

2010

Annu. Rev. Econ.

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“…Our article also belongs to a relatively recent but fast-growing thread in the international economics literature which employs the incomplete contracting approach for analyses of externally enforced trade agreements (Horn, 2006;Klimenko et al, 2008;Horn et al, 2010;Maggi and Staiger, 2011). The assumption that trade agreements are exogenously enforced (albeit incomplete) contracts is consistent with the reality of most international trade agreements as the WTO's member states rely on the organisation's dispute settlement mechanism for adjudicating their disputes and authorisation of sanctions for violations of negotiated market access commitments.…”

Section: Related Literaturementioning

confidence: 95%

Duration and Term Structure of Trade Agreements

Guriev

Klimenko

2015

Econ J

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Why are some trade agreements concluded for a limited period of time while others have the form of evergreen contracts supplemented with an advance termination notice clause? We use a dynamic incomplete contracting model to demonstrate that the time structure of the trade agreement is related to the nature of the underlying trade-related investments (or other types of irreversible resource adjustments). If these investments are lumpy and specialized to trade in a particular homogeneous good, the agreements with the …xed term of duration are more likely. The …xed-term agreement provides incentives for the initial investment but leaves the parties the ‡exibility to revisit the need for future investment by resorting to renegotiation. If the agreement covers trade in goods or services requiring incremental investments with spillovers of the investment bene…ts across industries, there is a lower risk of overinvestment. Therefore, the parties are more likely to choose an evergreen agreement (with an advance termination notice or an escape clause). We show that these predictions are consistent with the econometric evidence on the trade agreements to which the U.S. is a party.

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“…A few employed renegotiation proofness (MacLeod and Malcomson (1989), Levin (2003)). Even those who allowed for continued interaction following disagreement assumed that the players temporarily either receive an exogenous outside option (MacLeod and Malcomson (1989), Levin (2002), Halac (2012), Li (2010, 2012)) or play an exogenously selected stage Nash equilibrium (Raff and Schmidt (2000), Klimenko, Ramey, and Watson (2008)).…”

Section: Foundations For Relational Contractsmentioning

confidence: 99%

A Theory of Disagreement in Repeated Games With Bargaining

Miller

Watson

2013

Econometrica

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This paper proposes a new approach to equilibrium selection in repeated games with transfers, supposing that in each period the players bargain over how to play. Although the bargaining phase is cheap talk (following a generalized alternating-offer protocol), sharp predictions arise from three axioms. Two axioms allow the players to meaningfully discuss whether to deviate from their plan; the third embodies a "theory of disagreement"-that play under disagreement should not vary with the manner in which bargaining broke down. Equilibria that satisfy these axioms exist for all discount factors and are simple to construct; all equilibria generate the same welfare. Optimal play under agreement generally requires suboptimal play under disagreement. Whether patient players attain efficiency depends on both the stage game and the bargaining protocol. The theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors, and yields new insights into classic relational contracting questions.

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Recurrent trade agreements and the value of external enforcement

Cited by 46 publications

References 35 publications

The World Trade Organization: Theory and Practice

The World Trade Organization: Theory and Practice

Duration and Term Structure of Trade Agreements

A Theory of Disagreement in Repeated Games With Bargaining

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