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A directed search model of intermediated trade

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  • Fernández-Blanco, Javier

Abstract

This paper complements Antràs and Costinot's (2010) analysis of a two-good, two-country Ricardian economy in which farmers produce either goods but require intermediaries to exchange their production in the goods markets. The intermediation market is frictional, whereas the goods market is perfectly competitive. Unlike their random-search-and-price-bargaining setup, intermediaries herein post intermediation prices and farmers direct their search. Contrary to their findings, we show that opening the economy to international trade always leads to welfare gains. This is the case because domestic farmers benefit from relatively efficient intermediation technologies in terms of higher matching probabilities but also lower intermediation prices.

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  • Fernández-Blanco, Javier, 2012. "A directed search model of intermediated trade," European Economic Review, Elsevier, vol. 56(8), pages 1481-1494.
    • Handle: RePEc:eee:eecrev:v:56:y:2012:i:8:p:1481-1494
    DOI: 10.1016/j.euroecorev.2012.08.002
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    References listed on IDEAS

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    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in US Trade," American Economic Review, American Economic Association, vol. 100(2), pages 408-413, May.
    2. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
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    4. Bernard, Andrew & Redding, Stephen & Schott, Peter & Jensen, J Bradford, 2010. "Wholesalers and Retailers in US Trade (Long Version)," CEPR Discussion Papers 7642, C.E.P.R. Discussion Papers.
    5. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 467-491.
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    Cited by:

    1. Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00881151, HAL.

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    More about this item

    Keywords

    Ricardian economy; Directed search; Price posting; Coordination frictions;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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