Redirecting International Trade: Contracts, Conflicts, and Institutions

Abstract

SummaryThe global financial crisis has contributed to the redirection of trade towards new markets outside the OECD area, where both demand patterns and the institutional environment differ from those in the OECD. This study provides an empirical examination of the consequences of this shift, based on Swedish firm-level trade data. Results suggest that weak institutions hamper trade and reduce the length of trade relations, especially for small firms. Trade in industries that are characterized by a high frequency of trade conflicts and where transactions require extensive relationship-specific investments are particularly difficult to redirect towards markets with weak institutions.

Modelling the Risks of International Trade Contracts

“…The realization of the interests of the subjects of contractual legal relations implies the possibility of obtaining not only a positive result (in the form of achieving the desired good, usually profit), but also the possibility of unprofitable consequences [10][11]. This is especially pronounced in the sphere of international commodity exchange, which is characterized by the greatest degree of uncertainty, the complexity of trade relations, invariance, multifactor and dynamism.…”