Middlemen Margins and Globalization

Pranab Bardhan, Dilip Mookherjee and Masatoshi Tsumagari

American Economic Journal: Microeconomics, 2013, vol. 5, issue 4, 81-119

Abstract: We study a competitive theory of middlemen with brand-name reputations necessary to overcome product quality moral hazard problems. Agents with heterogeneous abilities sort into different sectors and occupations. Middleman margins do not equalize across sectors if production of different goods are differentially prone to moral hazard, generating endogenous mobility barriers. We embed the model in a setting of North-South trade, and explore the distributive implications of trade liberalization. With large intersectoral moral hazard differences, results similar to those of Ricardo-Viner specific-factor models obtain, whereby southern inequality increases. Otherwise, opposite (i.e., Stolper-Samuelson) results obtain.

JEL-codes: D63 D82 F12 F13 L15 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mic.5.4.81
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Citations: View citations in EconPapers (20)

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Related works:
Working Paper: MIDDLEMEN MARGINS AND GLOBALIZATION (2011)
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