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A directed search model of intermediated trade

  • Fernández-Blanco, Javier
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    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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    Article provided by Elsevier in its journal European Economic Review.

    Volume (Year): 56 (2012)
    Issue (Month): 8 ()
    Pages: 1481-1494

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    Handle: RePEc:eee:eecrev:v:56:y:2012:i:8:p:1481-1494
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    1. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in U.S. Trade (Long Version)," CEP Discussion Papers dp0968, Centre for Economic Performance, LSE.
    2. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 467-491.
    3. George Alessandria & Horag Choi, 2007. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Working Papers 07-17, Federal Reserve Bank of Philadelphia.
    4. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
    6. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
    7. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
    8. Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
    9. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Wholesalers and retailers in US Trade," LSE Research Online Documents on Economics 28614, London School of Economics and Political Science, LSE Library.
    10. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
    11. Pol Antràs & Arnaud Costinot, 2010. "Intermediated Trade," NBER Working Papers 15750, National Bureau of Economic Research, Inc.
    12. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    13. repec:oup:qjecon:v:106:y:1991:i:1:p:163-79 is not listed on IDEAS
    14. Robert E. Hall & Alan B. Krueger, 2010. "Evidence on the Determinants of the Choice between Wage Posting and Wage Bargaining," NBER Working Papers 16033, National Bureau of Economic Research, Inc.
    15. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
    16. Bernardo S. Blum & Sebastian Claro & Ignatius Horstmann, 2010. "Facts and Figures on Intermediated Trade," American Economic Review, American Economic Association, vol. 100(2), pages 419-23, May.
    17. repec:oup:restud:v:69:y:2002:i:2:p:467-91 is not listed on IDEAS
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