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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 id:2557, eSocialSciences.
  2. Marcel Fafchamps & Ruth Hill, 2005. "Price Transmission and Trader Entry in Domestic Commodity Markets," Economics Series Working Papers GPRG-WPS-038, University of Oxford, Department of Economics.
  3. Chau, Nancy H & Goto, Hideaki & Kanbur, Ravi, 2009. "Middlemen, Non-Profits and Poverty," CEPR Discussion Papers 7459, C.E.P.R. Discussion Papers.
  4. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
  5. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  6. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.
  7. Costinot, Arnaud & Antras, Pol, 2010. "Intermediation and Economic Integration," Scholarly Articles 4784026, Harvard University Department of Economics.
  8. 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, vol. 96(6), pages 1267-93, December.
  9. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  10. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, Fall.
  11. Hummels, David & Lugovskyy, Volodymyr & Skiba, Alexandre, 2009. "The trade reducing effects of market power in international shipping," Journal of Development Economics, Elsevier, vol. 89(1), pages 84-97, May.
  12. Costinot, Arnaud, 2008. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," University of California at San Diego, Economics Working Paper Series qt1cp9749b, Department of Economics, UC San Diego.
  13. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
  14. 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, vol. 12(3), pages 503-26, September.
  15. Kunal Dasgupta & Jordi Mondria, 2012. "Quality Uncertainty and Intermediation in International Trade," Working Papers tecipa-462, University of Toronto, Department of Economics.
  16. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics 2010:1, Stockholm University, Department of Economics.
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