Wheat or Strawberries? Intermediated Trade with Limited Contracting

Kala Krishna () and Yelena Sheveleva

American Economic Journal: Microeconomics, 2017, vol. 9, issue 3, 28-62

Abstract: 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.

JEL-codes: F11 O13 Q11 Q17 Q18 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mic.20140189
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Citations: View citations in EconPapers (10)

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Working Paper: Wheat or Strawberries? Intermediated Trade with Limited Contracting (2014)
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