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Intermediated Trade

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  • Antras, Pol
  • Costinot, Arnaud

Abstract

This paper develops a simple model of international trade with intermediation. We consider an economy with two islands and two types of agents, farmers and traders. Farmers can produce two goods, but in order to sell these goods in centralized (Walrasian) markets, they need to be matched with a trader, and this entails costly search. In the absence of search frictions, our model reduces to a standard Ricardian model of trade. We use this simple model to contrast the implications of changes in the integration of Walrasian markets, which allow traders from different islands to exchange their goods, and changes in the access to these Walrasian markets, which allow farmers to trade with traders from different islands. We find that intermediation always magnifies the gains from trade under the former type of integration, but leads to more nuanced welfare results under the latter, including the possibility of aggregate losses.

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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 4784024.

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Date of creation: 2011
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Publication status: Published in Quarterly Journal of Economics
Handle: RePEc:hrv:faseco:4784024

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  1. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers, eSocialSciences id:2557, eSocialSciences.
  2. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 25501, London School of Economics and Political Science, LSE Library.
  3. Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," World Bank Economic Review, World Bank Group, World Bank Group, vol. 12(3), pages 503-26, September.
  4. Chau, Nancy & Goto, Hideaki & Kanbur, Ravi, 2009. "Middlemen, Non-Profits, and Poverty," IZA Discussion Papers, Institute for the Study of Labor (IZA) 4406, Institute for the Study of Labor (IZA).
  5. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics, Stockholm University, Department of Economics 2010:1, Stockholm University, Department of Economics.
  6. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series, Bamberg University, Bamberg Economic Research Group 63, Bamberg University, Bamberg Economic Research Group.
  7. Marcel Fafchamps & Ruth Vargas Hill, 2004. "Selling at the farm-gate or travelling to market," CSAE Working Paper Series, Centre for the Study of African Economies, University of Oxford 2004-30, Centre for the Study of African Economies, University of Oxford.
  8. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, Elsevier, vol. 48(2), pages 271-299, August.
  9. Pol Antrás & Arnaud Costinot, 2010. "Intermediation and Economic Integration," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 424-28, May.
  10. Arnaud Costinot, 2009. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(5), pages 1011-1041, 09.
  11. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521576475.
  12. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
  13. Marcel Fafchamps & Ruth Hill, 2005. "Price Transmission and Trader Entry in Domestic Commodity Markets," Economics Series Working Papers, University of Oxford, Department of Economics GPRG-WPS-038, University of Oxford, Department of Economics.
  14. Hummels, David & Lugovskyy, Volodymyr & Skiba, Alexandre, 2009. "The trade reducing effects of market power in international shipping," Journal of Development Economics, Elsevier, Elsevier, vol. 89(1), pages 84-97, May.
  15. Kunal Dasgupta & Jordi Mondria, 2012. "Quality Uncertainty and Intermediation in International Trade," Working Papers, University of Toronto, Department of Economics tecipa-462, University of Toronto, Department of Economics.
  16. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(6), pages 1267-93, December.
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