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Overcoming Informational Barriers to International Resource Allocation: Prices and Group Ties

  • James E. Rauch
  • Alessandra Casella

Incomplete information in the international market creates difficulty in matching agents with productive opportunities and interferes with the ability of prices to allocate scarce resources across countries. Resource-price differentials may not be eliminated and domestic resource supplies may have excessive influence on domestic resource prices. Information-sharing networks among internationally dispersed ethnic minorities or business groups can improve the allocation of resources, though at the same time they may hurt those excluded from the preferential information channels. However, when ties are denser between countries with small resource price differences than between countries with large resource price differences, such networks can worsen the allocation of resources and reduce the value of world output.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6628.

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Date of creation: Jun 1998
Date of revision:
Publication status: published as "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties" , Economic Journal, Vol. 113 (January 2003), pp. 21-42.
Handle: RePEc:nbr:nberwo:6628
Note: ITI
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