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Cheap talk: transaction costs, quality of institutions, and trade agreements

Baccini, Leonardo (2014) Cheap talk: transaction costs, quality of institutions, and trade agreements. European Journal of International Relations, 20 (1). pp. 80-117. ISSN 1460-3713

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Identification Number: 10.1177/1354066112443272

Abstract

While there is evidence that politics matter for international cooperation, the impact on economic integration of the quality of institutions has been given short shrift in the previous literature. I argue that the quality of institutions raises the quantity and the quality of information available to potential member states during the bargaining phase of a trade agreement. In turn, this inflow of information reduces the negotiation period of an agreement and, in doing so, dampens the transaction costs associated with it. As a result, countries with good institutions are more likely to form trade agreements. Using original data on both the formation of trade agreements and the duration of negotiations, I quantitatively test this argument. The results strongly support the claim that the quality of institutions is a crucial driver in explaining the recent wave of regionalism.

Item Type: Article
Official URL: http://ejt.sagepub.com/
Additional Information: © 2012 The Author
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
J Political Science > JZ International relations
Sets: Departments > International Relations
Collections > Economists Online
Date Deposited: 24 Jul 2012 09:39
Last Modified: 12 Jun 2015 13:13
Funders: Ireland Research Scholarship in the Humanities and Social Science
URI: http://eprints.lse.ac.uk/id/eprint/44923

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