Do, Quy-ToanLevchenko, Andrei A.2012-03-302012-03-302009Journal of Economic Theory00220531https://hdl.handle.net/10986/5668This paper investigates the relationship between international trade and the quality of economic institutions. We model institutions as fixed costs of entry, in a framework that has two key features. First, preferences over entry costs differ across firms and depend on firm size. Larger firms prefer to set higher costs of entry, in order to reduce competition. Second, these costs are endogenously determined in a political economy equilibrium. Trade opening can lead to higher entry costs when it changes the political power in favor of a small elite of large exporters, who in turn prefer to install high entry barriers.ENInstitutions: Design, Formation, and Operations D020Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D720Neoclassical Models of Trade F110Trade PolicyInternational Trade Organizations F130Production, Pricing, and Market StructureSize Distribution of Firms L110Journal ArticleWorld Bank