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From bilateral trade to centralized markets: A search model for commodity exchanges in Africa

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  • Nyarko, Yaw
  • Pellegrina, Heitor S.

Abstract

Several African countries have recently centralized their agricultural markets by launching a commodity exchange. What will be the impact of such a move? Who will be the winners and the losers? We develop a simple search model to study the impact of introducing a commodity exchange in a village economy where traders and farmers exchange on a bilateral basis. We study the efficiency gains from moving from the status quo to a trading regime where farmers have the option of selling their produce to a commodity exchange. We describe how the gains from trade are distributed between farmers, traders and the commodity exchange itself. We show that a dual economy where high-cost farmers remain in the bilateral exchange market while low-cost ones sell to the commodity exchange can exist in equilibrium, and that forcing all farmers to sell into the commodity exchange can make some farmers worse off.

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  • Nyarko, Yaw & Pellegrina, Heitor S., 2022. "From bilateral trade to centralized markets: A search model for commodity exchanges in Africa," Journal of Development Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:deveco:v:157:y:2022:i:c:s0304387822000402
    DOI: 10.1016/j.jdeveco.2022.102867
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    Cited by:

    1. Marek Vochozka & Svatopluk Janek & Zuzana Rowland, 2023. "Coffee as an Identifier of Inflation in Selected US Agglomerations," Forecasting, MDPI, vol. 5(1), pages 1-17, January.

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    More about this item

    Keywords

    Agriculture; Bilateral exchange; Walrasian markets;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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