The Impact of Trade Openness on Institutions
The impact of opening to trade on economic institutions is likely to be multifaceted and depend crucially on country-specific circumstances. In the past decade an active body of research has studied this relationship. This framework makes is especi...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/568761487591720881/World-development-report-2017-the-impact-of-trade-openness-on-institutions http://hdl.handle.net/10986/26214 |
| Summary: | The impact of opening to trade on
economic institutions is likely to be multifaceted and
depend crucially on country-specific circumstances. In the
past decade an active body of research has studied this
relationship. This framework makes is especially clear why
international trade opening has the potential to transform
institutions. What is needed to effect institutional change
is a large and discrete change in the distribution of
economic resources in society. These papers draw attention
to the distribution of political power as the determinant of
how institutions react to trade opening. If “rent seekers”
are in power when trade opening occurs, international trade
often enables them to increase their rent-seeking behavior
and institutions deteriorate. If productive agents are in
power, the opposite occurs. Thus, these models point to the
possibility of a divergence in institutions as countries
open to trade. |
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