This chapter surveys recent work on informal institutions and trade. Trade barriers other than tariffs, quotas and transport costs are apparently very large even between developed countries such as the US and Canada. Nations exhibit wide variation in their use of informal institutions in trade, suggesting complex relations between formal and informal institutions and the volume of trade. New institutional economic research on informal institutions and trade attempts to explain these phenomena.

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... he institutions presumptively lower trade costs but impose costs of their own. Informal institutions presumptively substitute for but may complement formal institutions. Better institutions are not always in every trader s interest.