Intermediated Trade

Pol Antras and Arnaud Costinot

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper develops a simple model of international trade with intermediation. We consider an economy with two islands and two types of agents, farmers and traders. Farmers can produce two goods, but in order to sell these goods in centralized (Walrasian) markets, they need to be matched with a trader, and this entails costly search. In the absence of search frictions, our model reduces to a standard Ricardian model of trade. We use this simple model to contrast the implications of changes in the integration of Walrasian markets, which allow traders from different islands to exchange their goods, and changes in the access to these Walrasian markets, which allow farmers to trade with traders from different islands. We find that intermediation always magnifies the gains from trade under the former type of integration, but leads to more nuanced welfare results under the latter, including the possibility of aggregate losses.

Date: 2011
New Economics Papers: this item is included in nep-dge and nep-int
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Citations: View citations in EconPapers (82)

Published in Quarterly Journal of Economics

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Journal Article: Intermediated Trade (2011)
Working Paper: Intermediated Trade (2010)
Working Paper: Intermediated Trade (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:4784024

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