N-S Trade with Weak Institutions

45 Pages Posted: 29 Jan 2018 Last revised: 7 Apr 2023

See all articles by James E. Anderson

James E. Anderson

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2018

Abstract

States with weak institutions (South) can lose from institutional response to trade with North. A Ricardian model of trade subject to predation characterizes the case. South labor earns equal returns in production and predation. Institutions are needed for security improvement because equilibrium predation is invariant to globalization and productivity rises, contrary to casual intuition. Enforcement reduces predation with terms of trade effects that typically imply opposing North-South interests. Trade also incentivizes institutional regime change to counter or control predation. North para-state institutions gain by promoting corrupt South institutions – Mafias or their state equivalents – over welfarist South states.

Suggested Citation

Anderson, James E., N-S Trade with Weak Institutions (January 2018). NBER Working Paper No. w24251, Available at SSRN: https://ssrn.com/abstract=3112038

James E. Anderson (Contact Author)

Boston College - Department of Economics ( email )

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