Markets and Transactions in Developing Countries

It has been widely observed that markets in developing countries tend to be more segmental than in developed countries. Various concepts have been used in the literature to describe this phenomenon such as parallel, curb, segmented, fragmented, black and informal markets. The above terms are used to explain the persistence of different price levels and multiple market settings for similar goods and factors. This study attempts to understand the underlying causes of the various forms of segmentation above. The approach which is followed is to trace distinct markets back to their building blocks, i.e. to the specific combination of elements which jointly shape a given market configuration and corresponding transaction. An analytical framework capable of identifying distinct markets on the basis of their respective constituting element is developed. It is postulated that there are three sets of elements, which in different combinations, shape distinct markets and help explain their operation: 1) the item exchanged; 2) the market actors engaged in the decisions related to the item being exchanged; and 3) the environment in which actors operate. These elements are discussed in detail in Chapter before proposing a general analytical scheme for distinguishing market configurations. This scheme is applied in Chapter 3 in deriving typologies of market configurations for products, labor, credit, land and foreign exchange, respectively. Specific examples of typical markets in each one of the above five sets are analyzed in some detail before focusing on a) their key elements and characteristics; b) the endogenous determination of transactions; and c) the operation and performance of the market.