Intermediated Trade / Pol Antràs, Arnaud Costinot.

Format:

Book

Author/Creator:

Antràs, Pol.

Contributor:

National Bureau of Economic Research.

Costinot, Arnaud.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15750.

NBER working paper series no. w15750

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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. These welfare losses may be circumvented, however, through policies that discriminate against foreign traders in a way that minimizes the margins charged by domestic traders.

Notes:

Print version record

February 2010.