Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India

Anand Swamy and Rachel Kranton

No 2006-01, Center for Development Economics from Department of Economics, Williams College

Abstract: Trade and export, it is argued, spur economic growth. This paper studies the microeconomics of exporting. We build a heuristic model of transactions between exporters and producers and relate it to East India Company operations in colonial Bengal. Our model and the historical record stress two difficulties: the exporter and its agents might not uphold pricing agreements, and producers might not honor sales contracts. The model shows when procurement succeeds or fails, highlighting the tension between these two hold-up problems. We analyze several cases including the East India Company's textile venture, the famous Opium Monopoly, and present-day contract farming.

Pages: 37 pages
Date: 2006-12
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in American Economic Review, June 2008, v. 98, iss. 3, pp. 967-89.

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Related works:
Journal Article: Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India (2008)
Working Paper: Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India (2006)
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