Intermediation and Economic Integration
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.
We thank Jon Eaton, Emmanuel Farhi, Gita Gopinath, and Steve Redding for comments. This paper has been prepared for the 2010 American Economic Review Papers and Proceedings. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Pol Antrás & Arnaud Costinot, 2010. "Intermediation and Economic Integration," American Economic Review, American Economic Association, vol. 100(2), pages 424-28, May. citation courtesy of