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TRADE DISPUTES AND SETTLEMENT
Author(s) -
Maggi Giovanni,
Staiger Robert W.
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12261
Subject(s) - settlement (finance) , verifiable secret sharing , variety (cybernetics) , outcome (game theory) , economics , international trade , key (lock) , world trade , trade barrier , international economics , complete information , business , law and economics , microeconomics , finance , computer science , computer security , payment , set (abstract data type) , artificial intelligence , programming language
We develop a model of trade agreements with renegotiation and imperfectly verifiable information. In equilibrium, trade disputes can occur and can be resolved in a variety of ways: Governments may settle “early” or trigger a court ruling, and in the latter case, they may implement the ruling or reach a post‐ruling settlement. The model yields predictions on how the dispute outcome depends on the contracting environment and how it correlates with the optimal contract form. We find support for a key prediction of our model using data on the outcomes of actual trade disputes in the General Agreement on Tariffs and Trade/World Trade Organization.
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