TY  - JOUR
AU  - Anderson,James E.
AU  - Marcouiller,Douglas
TI  - Trade, Insecurity, and Home Bias:  An Empirical Investigation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7000
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7000
L1  - http://www.nber.org/papers/w7000.pdf
N1  - Author contact info:
James E. Anderson
Department of Economics
Boston College
Chestnut Hill, MA 02467
Tel: 617/552-3691
Fax: 617/552-2308
E-Mail: james.anderson.1@bc.edu

Douglas Marcouiller
Economics Department
Saint Louis University
3674 Lindell Boulevard
St. Louis, MO 63108
Tel: (314) 977-3614
E-Mail: marcoudw@slu.edu
AB  - Corruption and imperfect contract enforcement dramatically reduce trade.  This paper estimates the reduction, using a structural model of import demand in which transactions costs impose a price markup on traded goods.  We find that inadequate institutions constrain trade far more than tariffs do. We also find that omitting indexes of institutional quality from the model leads to an underestimate of home bias. Using a broad sample of countries, we find that the traded goods expenditure share declines significantly as income per capita rises, other things equal. Cross-country variation in the effectiveness of institutions offers a simple explanation of the observed global pattern of trade, in which high-income, capital-abundant countries trade disproportionately with one another.
ER  -