Wheat or Strawberries? Intermediated Trade with Limited Contracting

Kala Krishna () and Lena Sheveleva

No 20630, NBER Working Papers from National Bureau of Economic Research, Inc

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 phyto-sanitary (SPS) requirements, and the creation of local markets in resolving the hold-up problem. The model highlights the importance of infrastructure in aligning production with comparative advantage and sheds light on the pass-through of the world price to the producer.

JEL-codes: O12 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-agr and nep-cta
Note: DEV
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Citations: View citations in EconPapers (1)

Published as Kala Krishna & Yelena Sheveleva, 2017. "Wheat or Strawberries? Intermediated Trade with Limited Contracting," American Economic Journal: Microeconomics, vol 9(3), pages 28-62.

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