Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India
Year: 2008
Type: article
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 (EIC) operations in colonial Bengal. Our model and the historical record stress two difficulties: the exporter and its agents might not uphold payment 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 EIC's cotton textile venture, the famous Opium Monopoly, and present-day contract farming. (JEL D86, F14, N55, N75)
Source: American Economic Review
DOI: 10.1257/aer.98.3.967
Authors: Rachel Kranton, Anand V Swamy
Institutions: Duke University, Williams College
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2146403669