How Important is State Enforcement for Trade?
- Send correspondence to: Peter T. Leeson, Department of Economics, George Mason University, MSN 3G4, Fairfax, VA 22030, USA; E-mail: pleeson{at}gmu.edu
Abstract
According to conventional wisdom, state-provided contract enforcement is critical to an expansive, growing trade. This paper estimates state enforcement's impact on international trade for one hundred and fifty-seven countries over the last half a century. I find that state enforcement increases trade between nations by about fifteen to thirty-eight percent. This effect is significant though modest compared to intuition about the importance of government enforcement, the long-run growth of trade, and the estimated effect of trade's other determinants. Thus, while state enforcement appears to enhance trade, it does so less impressively than its status as essential for flourishing trade tends to suggest.
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