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I. INTRODUCTION The popular proposition that a large natural resource endowment (especially of oil) constitutes a "curse" on growth and development, or more broadly on human welfare, has been examined rather extensively, both theoretically and empirically. Some robust empirical results were presented by Sachs and Warner (1997, 2001) and Ross (2001, 2012), among others. Indeed, Doppelhofer, Miller, and Sala-i-Martin (2000) asserted that the negative effect of oil dependence on economic growth is one of the most robust empirical relationships in the entire empirical growth literature. Yet, others (Bachmeier, Li, and Liu 2008; Mehlum, Moene, and Torvik 2006a) have come to almost the opposite conclusion showing that oil price and export movements are very poor predictors of economic activity and that the magnitude and direction of the relation between oil dependence and growth depends heavily on institutional characteristics which may differ from country to country and over time. To the extent that the effect of oil on growth depends on institutions, however, this may suggest that the growth relation is only an indirect one coming through oil's effects on these institutional channels, with different institutional channels possibly affecting growth in different directions. Among the most frequently cited institutional links are property rights, the incentives or disincentives to accumulate human and physical capital, the ability to control volatility in economic activity, quality of governance, the ability to ward off conflicts, and to manage real exchange rates (and hence international competitiveness in tradable goods) and corruption (van der Ploeg 2011). Hence, both the validity of the oil curse and understanding how it works may depend on what oil resources do to the development of different institutions. As explained in Section II, in view of the extremely slow pace of change typical of most institutions, the vast majority of studies on these links have concentrated on a single link, most commonly democratic governance, and have largely relied on international cross section analysis, relating oil or other natural resource endowments to the quality of institutions (usually a democracy index) at a point in time. (1) Some exceptions to this generalization are discussed below. Most studies comparing the effects of different types of natural resource abundance on growth have identified an abundance of oil as having the most adverse effects, and institutions as the most important factors affecting the magnitude and direction of these effects (Acemoglu, Johnson, and Robinson 2001; Acemoglu and Robinson 2006a, 2006b; Nunn 2008). Thus, our objective is to examine whether or not oil can raise or lower the institutional quality indicators of any of the types that may serve as important links between resource abundance and economic growth. Instead of examining the relationship between levels of oil resource abundance and levels of institutional quality, we examine the effects of oil on changes in institutional quality. We examine the effects of oil abundance on changes in each of 13 different institutional indicators (for which appropriate indicators exist over time), including bureaucratic quality, corruption, law and order, resistance to ethnic tension, internal conflicts, external conflicts, government stability, investment profile, and socioeconomic conditions. We also examine the effects of oil abundance on four dimensions of governance: democracy, polity, regulations on executive recruitment, and constraints on the executive. Additionally, we wish to examine the sensitivity of these institutional outcomes to alternative measures of both oil abundance and experience in the oil industry and to possible interactions between the two. These are all factors that have been suggested as being relevant either to institutional change or to the effects of oil on growth. As the various measures of oil abundance/dependence used in the literature have been subjected to criticism for concerns of endogeneity, thereby biasing the estimated effects in one direction or another, we devote considerable effort to testing for endogeneity and reducing it as much as possible. …

I. INTRODUCTION Firms in oppressive environments such as those of the transition economies face a variety of problems, including the high cost of complying with regulations, frequent changes in those regulations, and hence lack of knowledge about current regulations and policies; difficulties in gaining access to telephones, electricity, and infrastructure; inefficient and corrupt judicial systems; and cumbersome and non-transparent licensing, customs procedures, and rule making. As a result, it is common for firms in transition economies to make unofficial payments to officials to obtain needed services and avoid taxes and regulations (Djankov et al., 2002; Johnson, Kaufmann, and Schleifer, 1997). While there are oppressive and corrupt regimes in many parts of the world, a survey by the European Bank for Reconstruction and Development (EBRD, 1999) showed the transition economies to have the highest scores for corruption among public officials of all country groupings. As recently as 2001, only 1 of the 25 transition countries included in this study (Slovenia) had a score for control of corruption of 5.0 or more on the widely used 0-10 scale of the Corruption Perception Index (CPI) of Transparency International. 1 Even after some improvement in corruption control or freedom from corruption in the region since then, in 2007 there were still only three transition countries with scores of 5.0 or more, and half of the rest had scores of 3.0 or below (Corruption Perception Index website). These scores are based on the perceptions of a wide variety of people. Using data from the first year (2002) of the two rounds of the survey used in this study for 25 transition countries, Campos and Giovanoni (2008) assert that some 18% of the firms in the sample say that 10% or more of their revenues are spent on unofficial payments to officials. Based on a still earlier round (1999) of the same data set, Hellman, Jones, and Kaufmann (2000) find that the percentage of firms in each transition country admitting to ever having paid bribes ranged from 45% (Belarus and Slovenia) to 90% (Kyrgyzstan). With respect to the frequency of such payments, Tanzi and Tsibouris (2000) report that as much as 59.3% of firms (for Azerbaijan) admitted to making these unofficial payments "frequently or more often." Somewhat surprisingly, even with improving economic conditions in transition economies and their success in attracting foreign direct investment (FDI), firms in transition economies with FDI are reported to be even more prone than other domestic firms to make unofficial payments (Anderson, 2005). Tax evasion is another huge and endemic problem in the transition economies. Uslaner (forthcoming) cites numerous sources stating the extent of tax evasion to be extremely high in most transition countries, ranging up to 40% of gross domestic product (GDP). He also shows that "tax morale" (as measured by questions on the World Value Surveys concerning the acceptability of tax cheating) is typically much lower for people in transition countries than for those in other countries. (See also Hanousek and Palda, 2004.) When citizens deem their governments to be corrupt, implying that funds are diverted from their intended public purposes to the private ones of bureaucrats and their friends, they see nothing wrong with not paying their taxes. This makes these two distinguishing characteristics of transition countries, high corruption and tax evasion, interrelated. If judges are corrupt, firms know that the court system will not be fair. If tax officials are corrupt, tax enforcement is likely to be sporadic and inefficient. With corruption and stiflingly rigid regulations and tax rates, a common strategy for firms is to operate outside the official economy. Indeed, Johnson, Kaufmann, and Schleifer (1997) reported the shadow economies of the countries of the former Soviet Union to average 34% of their respective GDPs and corruption to be related to tax evasion. …

The heads of state of Asia-Pacific Economic Cooperation (APEC) nations have committed member nations to remove all barriers to trade both among themselves and with respect to the rest of the world by 2020. The present paper uses a simple econometric model of bilateral trade flows based on country size, relative factor endowments, and trade barriers of importing as well as exporting countries to estimate the shares by country of origin in imports of each of the 16 major APEC countries and the rest of the world for each of 45 commodity groups comprising world trade in commodities. The estimates reveal that APEC trade would be expanded by 13% with complete liberalization of tariff barriers, by an additional 5% if nontariff barriers are also removed, and by another 4% if the rest of the world would also remove all barriers to trade. Variants on this base scenario show that such trade expansion could be substantially reduced were trade liberalization, capital growth, or both to be reduced in the countries affected by the Asian financial crisis. (JEL Fl, F17)

This paper develops hypotheses concerning firm- and industry-specific factors determining the relative importance to manufacturing exporters of different export channels in relatively high transaction cost Korean small and medium-sized enterprises (SMEs). Data from a Korean SME survey demonstrate the validity of several hypotheses and reveal that most sample SMEs rate the external support for international marketing rather low. The paper offers recommendations for reforming such support.

I. INTRODUCTION In a world with perfect markets and zero transaction costs, penetrating international markets is a simple matter of production cost--comparative advantages determine which producers penetrate international markets and when. Yet, despite remarkable technological improvements relevant to the costs of international transacting and despite considerable-relaxation of exchange controls, the costs of international transactions generally are far from negligible. (See, for example, Wortzel and Wortzel, 1979, on developing country producers or local agents who persistently receive a low share of an exported good's eventual sale price.) In particular, from around the world growing evidence suggests that reforms designed to provide the right economic environment and incentives for exports are insufficient in themselves to generate rapid export growth (Keeling, 1979; Morawetz, 1981; Dean et al., 1994; Greenaway and Morrissey, 1993). In some respects, international marketing transaction costs even may be increasing over time, preventing otherwise beneficial transactions from taking place. Failure to recognize the high transaction costs in international marketing and to design appropriate strategies for dealing with them may doom to failure even excellent policy reforms. The costs of reform failures are high--as are the costs of failing to try reform. This paper uses Egypt as a case study to: (i) develop socially relevant but testable hypotheses concerning the ways and means of exporting, (ii) test the validity of such hypotheses, and (iii) derive practical policy proposals to help producers in Egypt and in other less developed countries (LDCs) take better advantage of international market opportunities. II. TRANSACTION COSTS IN INTERNATIONAL MARKETING Transaction costs include (i) the costs of obtaining information about market conditions in any given foreign market (the quantities and qualities desired and the prices prevailing for each different quality) and the reciprocal costs for agents in foreign countries, (ii) the costs of information about government regulations and other policies in both foreign and home markets (including exchange rate policy, exchange restrictions, tariff and non-tariff barriers, and health and environmental regulations), (iii) the costs to each potential party of identifying appropriate trading partners in these markets, (iv) the costs of negotiating, writing, and enforcing contracts and resolving disputes between the parties, and (v) the costs of financing the transaction, which generally involves a long lag between placing an export order and making final payment for it, and of bearing the risks of default throughout the process. Many factors tend to make these costs much higher than those of domestic transactions. Such factors include (i) differences in language, culture and taste, laws and dispute resolution procedures, income and information sources, the modus operandi of markets, and the extent and character of competition, and (ii) difficulties of enforcing contracts across countries, and hence the higher risks of payment default. These transaction costs are not merely static. They change substantially over time with changes in the identities of the trading agents, environmental conditions, and the character of the respective markets. An exporter may possess all the right information about all the relevant factors in a particular market at one point in time, but rapid change can easily make that information obsolete. Indeed, for any individual country, over time two important trends tend to raise transaction costs for developing country exporters: (i) the growing relative importance in developing country exports of quality-differentiated and increasingly specialized products for which distinguishing between contract fulfillment and non-fulfillment (deliberate or otherwise) is difficult and (ii) the growing use in developed countries (at both the national and subnational levels) of various non-tariff barriers to trade, including environmental regulations, which are subject to more abrupt changes over time than are tariff barriers. …

I. INTRODUCTION Countertrade (CT) grew dramatically in the world economy during the 1970s and 1980s. Common explanations for CT cite national strategies for overcoming foreign exchange and credit constraints and business strategies for creating new markets, reducing the uncertainty of export prices and by-passing the constraints imposed by international price agreements. Other explanations emphasize CT's incentive-compatible features, which overcome the adverse selection and moral hazard problems inherent in the information asymmetries of technology transfer and marketing. Abbreviations ACTREE: Arab Company for Transistor Radio and Electronic CP: Counterpurchase CT: Countertrade CU: Customs Union DC: Developed Country LDC: Less Developed Country These explanations are not without fault. Mirus and Yeung (1987 and 1992) identify alternative and lower-cost means of pursuing national and business strategies. And the incentive-compatibility argument implies that CT would apply primarily in the case of sophisticated, highly differentiated goods in many different transactions in industries with characteristics favorable to CT. However, evidence shows that CT is applied more frequently to raw materials and simple rather homogeneous goods and services in transactions between single pairs of firms in a variety of industries and products. Most existing theories explain why CT would be more prominent in certain types of countries, sectors, and time periods than in others but generally fail to explain why and how CT is typically confined only to certain partners within sectors, countries, and time periods. The customs union (CU) theory is a useful alternative perspective on CT. CU theory is useful in explaining why CUs in some cases are trade-creating and therefore welfare-enhancing but in other cases are trade-diverting and hence welfare-reducing. The same principles of trade creation and diversion can explain why CT in some cases is welfare-enhancing but in other cases welfare-reducing even in the same industry, country, and time period. In both CU and CT transactions, the particular trading partners' characteristics are of crucial importance in determining the sign of the net benefits generated. Section II gives the trade creation and trade diversion analysis of CT. Section III examines a case study from Egypt. Section IV offers conclusions. II. TRADE CREATING AND TRADE DIVERTING COUNTERTRADE CT transactions almost invariably are interlinked and take place between specific trading partners, typically between different firms in different industries and countries. Traditional (neoclassical) trade theory holds that the partners in any transaction are essentially anonymous. However, in interlinked transactions generally and in CT transactions particularly, the partners are clearly specified and named. CU theory suggests that partner characteristics potentially are important determinants of the sign and magnitude of transactions' net benefits. In CUs the partners are countries, while in CT they are firms in different countries. CT can take several different forms. The incentives (or rationale) for each form may vary, at least in relative importance. Some forms might even require (or at least benefit from) certain methods of analysis. Recent CT literature has focused the least analytical attention on perhaps the most important form, counterpurchase (CP) (Hoffmann, 1989). Since other forms of CT such as barter, offset, and buy-back share the characteristics of and rationale for CP, the analysis here also should apply, at least partially, to these other forms. And, since asymmetric information problems are less severe in CP arrangements, in order to simplify and focus on trade creation and diversion, the analysis here abstracts from information asymmetries and general equilibrium considerations. Consider a simple CP example involving two interlinked transactions, primary and secondary, between two specific firms owned and operated in two different countries, one a developed country (DC) firm and the other a less developed country (LDC) firm. …