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Marketing externalities and market development

Author

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  • Emran, M. Shahe
  • Shilpi. Forhad

Abstract

The authors use survey data from Bangladesh to present empirical evidence on externalities at household level sales decisions resulting from increasing returns to marketing. The increasing returns that arise from thick market effects and fixed costs imply that a trader is able to offer higher prices to producers if the marketed surplus is higher in villages. The semi-parametric estimates identify highly nonlinear own and cross commodity externality effects in the sale of farm households. The vegetable markets in villages with low marketable surplus seem to be trapped in segmented local market equilibrium. The analysis points to the coordination failure in farm sale decisions as a plausible explanation for the lack of development of rural markets even after market liberalization policies are implemented.

Suggested Citation

  • Emran, M. Shahe & Shilpi. Forhad, 2002. "Marketing externalities and market development," Policy Research Working Paper Series 2839, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2839
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    References listed on IDEAS

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    4. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April.
    5. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, pages 54-70.
    6. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    7. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
    8. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
    9. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    10. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-737, July.
    11. Craig L Infanger, 1993. "The Agrarian Origins of Commerce and Industry, A Study of Peasant Marketing in Indonesia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 35(2), pages 60-62, July.
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    Cited by:

    1. Palsule-Desai, Omkar D., 2015. "Cooperatives for fruits and vegetables in emerging countries: Rationalization and impact of decentralization," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 81(C), pages 114-140.

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