The interrelation between formal and informal institutions through international trade
Loading...
Links to Files
Author/Creator
Author/Creator ORCID
Date
2021-05-01
Type of Work
Department
Program
Citation of Original Publication
Park, Se Mi; The interrelation between formal and informal institutions through international trade; Review of International Economics (2021); https://onlinelibrary.wiley.com/doi/abs/10.1111/roie.12546
Rights
This item is likely protected under Title 17 of the U.S. Copyright Law. Unless on a Creative Commons license, for uses protected by Copyright Law, contact the copyright holder or the author.
This is the peer reviewed version of the following article: Park, Se Mi; The interrelation between formal and informal institutions through international trade; Review of International Economics (2021); https://onlinelibrary.wiley.com/doi/abs/10.1111/roie.12546, which has been published in final form at https://doi.org/10.1111/roie.12546.
Access to this item will begin on 2023-05-01
This is the peer reviewed version of the following article: Park, Se Mi; The interrelation between formal and informal institutions through international trade; Review of International Economics (2021); https://onlinelibrary.wiley.com/doi/abs/10.1111/roie.12546, which has been published in final form at https://doi.org/10.1111/roie.12546.
Access to this item will begin on 2023-05-01
Subjects
Abstract
This paper theoretically examines how country-specific formal and informal institutions are interrelated through international trade within a two-country general-equilibrium framework. When formal and informal institutions collectively generate institutional quality, formal institutions endogenously arise based on exogenously given informal institutions. Institutional quality governs the productivity of an institutionally intensive sector that features increasing returns. I find that in open economies, formal institutions tend to improve with the quality of informal institutions. In contrast, under autarky, formal institutions deteriorate with informal institutional quality. These results reveal that trade opens up the opportunity for enhancing formal institutions of countries with rich informal institutions.