DP7697 Intermediation and Economic Integration

Author(s): Pol Antràs, Arnaud Costinot
Publication Date: February 2010
Keyword(s): economic integration, gains from trade, intermediation, search frictions
JEL(s): D2, D3, F10, F15, O1
Programme Areas: International Trade and Regional Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7697

The theory of international trade has paid scant attention to market institutions. Neither neoclassical theory nor new trade models typically specify the process by which supply and demand meet. Yet in the real world, intermediaries play a central role in materializing the gains from exchange outlined by standard trade theories. In Antràs and Costinot (2010), we have developed a stylized but explicit model of intermediation in trade. In this short paper, we present a variant of this model that illustrates the potential role of intermediaries in facilitating the realization of the gains from trade.