TRADE DISPUTES AND SETTLEMENT. (2nd February 2018)

• Record Type: Journal Article
• Authors: Maggi, Giovanni; Staiger, Robert W.
• Is Part Of: International economic review. Volume 59:Number 1(2018:Feb.)
• Page Start: 19
• Page End: 50
• Publication Date: 2018-02-02
• Subjects: Economics -- Periodicals; 330.05
• DOI: 10.1111/iere.12261
• Languages: English
• ISSNs: 0020-6598

Abstract

Abstract: 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.