Cardiff Business School
Colum Dr, Cardiff CF10 3EU
Institutional Affiliation: Cardiff Business School
NBER Working Papers and Publications
|October 2014||Wheat or Strawberries? Intermediated Trade with Limited Contracting.|
with Kala Krishna: w20630
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.
Published: Kala Krishna & Yelena Sheveleva, 2017. "Wheat or Strawberries? Intermediated Trade with Limited Contracting," American Economic Journal: Microeconomics, vol 9(3), pages 28-62.