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Wheat or strawberries? Intermediated trade with limited contracting

Krishna, Kala and Sheveleva, Yelena 2017. Wheat or strawberries? Intermediated trade with limited contracting. American Economic Journal: Microeconomics 9 (3) , pp. 28-62. 10.1257/mic.20140189

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Why do developing countries fail to specialize in products in which they appear to have a comparative advantage? We propose a model of agricultural trade with intermediation that explains how hold-up resulting from poor contracting environments can produce such an outcome. We use the model to explore the role of production subsidies, support prices, easing sanitary and phytosanitary (SPS) requirements, and the creation of local markets in resolving the hold-up problem. The model highlights the importance of infrastructure in aligning production outcomes with comparative advantage and sheds light on the pass-through of the world price to the producer.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: American Economic Association
ISSN: 1945-7669
Date of First Compliant Deposit: 27 October 2016
Date of Acceptance: 18 August 2016
Last Modified: 19 Jan 2021 22:06

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