In producer-friendly economies, - economies that are ruled by productive agents and have strong property rights institutions, - international trade causes an institutional improvement and an aggregate shift of talent towards production and away from socially wasteful appropriation. However, in...

Domestic institutions can have profound effects on international trade. This chapter reviews the theoretical and empirical underpinnings of this insight. Particular attention is paid to contracting institutions and to comparative advantage, where the bulk of the research has been concentrated....