Middlemen Margins and Globalization
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چکیده
We develop a two-good model of North-South trade where middlemen mediate trade in the good exported by the South to overcome quality assurance problems. Middleman margins and entry into intermediation are endogenously determined by underlying distribution of entrepreneurial ability. Trade liberalization increases inequality in the Southern export sector, as middleman margins increase more than producer prices. Gains from trade are positive in the South and may be negative in the North. Northern intermediaries have an incentive to out-source to suppliers in the South. Such outsourcing reduces inequality in the Southern export sector and raises unskilled wages, with opposite effects in the North.
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