Year: 2017
Type: article
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 F11, O13, Q11, Q17, Q18)
DOI: 10.1257/mic.20140189
Authors: Kala Krishna, Yelena Sheveleva
Institutions: Pennsylvania State University, Cardiff University
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W1549144516