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Intermediated Trade

  • Pol Antràs
  • Arnaud Costinot

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 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. Copyright 2011, Oxford University Press.

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Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 126 (2011)
Issue (Month): 3 ()
Pages: 1319-1374

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Handle: RePEc:oup:qjecon:v:126:y:2011:i:3:p:1319-1374
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  1. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
  2. 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.
  3. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  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 Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
  6. David Hummels & Volodymyr Lugovskyy & Alexandre Skiba, 2007. "The Trade Reducing Effects of Market Power in International Shipping," NBER Working Papers 12914, National Bureau of Economic Research, Inc.
  7. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  8. Kunal Dasgupta & Jordi Mondria, 2012. "Quality Uncertainty and Intermediation in International Trade," Working Papers tecipa-462, University of Toronto, Department of Economics.
  9. Marcel Fafchamps & Ruth Vargas Hill, 2008. "Price Transmission and Trader Entry in Domestic Commodity Markets," Economic Development and Cultural Change, University of Chicago Press, vol. 56, pages 729-766.
  10. 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.
  11. Chau, Nancy H & Goto, Hideaki & Kanbur, Ravi, 2009. "Middlemen, Non-Profits and Poverty," CEPR Discussion Papers 7459, C.E.P.R. Discussion Papers.
  12. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.
  13. Arnaud Costinot, 2009. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1011-1041, 09.
  14. Antràs, Pol & Costinot, Arnaud, 2010. "Intermediation and Economic Integration," CEPR Discussion Papers 7697, C.E.P.R. Discussion Papers.
  15. 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.
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