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Transaction costs and market institutions

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  • Gabre-Madhin, Eleni Z.
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    Abstract

    This paper examines the effect of transaction costs of search on the institution of grain brokers in Ethiopia. Primary data are used to derive traders' shadow opportunity costs of labor and of capital from IV estimation of net profits. A two-step Tobit model is used in which traders first choose where to trade and then choose whether to use a broker to search on their behalf. The results confirm traders' individual rationality in choosing brokerage, showing high transaction costs are linked to increased broker use while high social capital reduces broker use.

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    File URL: http://www.ifpri.org/sites/default/files/publications/pubs_divs_mtid_dp_papers_dp31.pdf
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    Bibliographic Info

    Paper provided by International Food Policy Research Institute (IFPRI) in its series MTID discussion papers with number 31.

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    Date of creation: 1999
    Date of revision:
    Handle: RePEc:fpr:mtiddp:31

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    Related research

    Keywords: Grain Economic aspects. ; Grain Prices Ethiopia. ; Grain Trade East Africa. ; Grain trade. ;

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
    2. Hoff, Karla & Stiglitz, Joseph E, 1990. "Imperfect Information and Rural Credit Markets--Puzzles and Policy Perspectives," World Bank Economic Review, World Bank Group, vol. 4(3), pages 235-50, September.
    3. Mundlak, Yair, 1996. "Production Function Estimation: Reviving the Primal," Econometrica, Econometric Society, vol. 64(2), pages 431-38, March.
    4. Townsend, Robert M, 1978. "Intermediation with Costly Bilateral Exchange," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 417-25, October.
    5. Ravallion, Martin & Dearden, Lorraine, 1988. "Social Security in a "Moral Economy": An Empirical Analysis for Java," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 36-44, February.
    6. Cosimano, Thomas F, 1996. "Intermediation," Economica, London School of Economics and Political Science, vol. 63(249), pages 131-43, February.
    7. Aitken, Michael J & Garvey, Gerald T & Swan, Peter L, 1995. "How Brokers Facilitate Trade for Long-Term Clients in Competitive Securities Markets," The Journal of Business, University of Chicago Press, vol. 68(1), pages 1-33, January.
    8. Rubinstein, Ariel & Wolinsky, Asher, 1987. "Middlemen," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 581-93, August.
    9. Pranab Bardhan., 1987. "Alternative Approaches to the Theory of Institutions in Economic Development," Economics Working Papers 8761, University of California at Berkeley.
    10. Barrett, Christopher B., 1997. "Food marketing liberalization and trader entry: Evidence from Madagascar," World Development, Elsevier, vol. 25(5), pages 763-777, May.
    11. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
    12. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-29, July.
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