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Cutting Out The Middleman: The Structure of Chains of Intermediation


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Moynihan Institute of Global Affairs 

Trade, Development and Political Economy presents

Cutting Out The Middleman: The Structure of Chains of Intermediation

Authors: Meredith Startz and Matthew Grant

Wholesalers and other intermediaries play a major role in trade. In survey data from Nigeria, the authors find that there are on average at least three separate intermediaries between an international manufacturer and a Nigerian consumer. The authors model the formation of these chains, and their implications for measurement of trade costs and consumer welfare across locations within Nigeria. They find that consumers in entrepôts benefit from indirect demand flowing through their location, and consumers in end destinations can also benefit from longer chains of intermediation in some cases. Taking chains into account also suggests that estimates of distance costs in developing countries are biased upward, and may contribute less to consumer-producer price gaps than typically thought. 

Meredith Startz

Assistant Professor, Economics

Dartmouth College

Meredith Startz is an Assistant Professor of Economics at Dartmouth. Her research is at the intersection of development and trade, and focuses on how contracting problems shape transactions and firms in developing countries.

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