Transaction Costs on a National Level: Causes and Consequences

The empirical core of this essay is a set of estimates of the aggregate transaction costs for sixteen European nations. I explore a number of hypothesized determinants of these costs, but only an economic systems variable, defined in terms of the institutional structure of the country, passes a test of statistical significance. I also examine the impact of these aggregate costs by testing the hoary micro-economic proposition that high transaction costs cause greater vertical integration, an hypothesis I confirm on the macro-level.