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Middlemen Margins And Globalization

  • Dilip Mookherjee

    ()

    (Department of Economics, Boston University)

  • Pranab Bardhan

    (Department of Economics, University of California, Berkeley)

  • Masatoshi Tsumagari

    ()

    (Department of Economics, Keio University)

We provide a competitive theory of middlemen or entrepreneurs who develop brand-name reputations necessary to overcome product quality moral hazard problems, embedded in a Heckscher-Ohlin model of North-South trade. Agents with heterogeneous entrepreneurial abil- ities sort into different sectors and occupations, with endogenous inter- sectoral mobility. In some contexts competitive equilibrium is charac- terized by restricted inter-sectoral mobility; bene ts of trade liberal- ization in the South accrue disproportionately to middlemen, North- South factor price differences grow, and offshoring reduces inequality in the South. In other contexts there is enough mobility; classical Stolper-Samuelson and factor price equalization results hold.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-034.

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Length: 48 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-034
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