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American Economic Review: Vol. 98 No. 3 (June 2008)
AER Volume. 98, Issue 3 | 
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Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India
Article Citation
Kranton, Rachel, and
Anand V. Swamy. 2008. "Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India."
American Economic Review,
98(3): 967-89.
DOI: 10.1257/aer.98.3.967
DOI: 10.1257/aer.98.3.967
Abstract
Trade and export, it is argued, spur economic growth. This paper studies
the microeconomics of exporting. We build a heuristic model of transactions
between exporters and producers and relate it to East India Company (EIC)
operations in colonial Bengal. Our model and the historical record stress
two difficulties: the exporter and its agents might not uphold payment
agreements, and producers might not honor sales contracts. The model shows
when procurement succeeds or fails, highlighting the tension between these
two hold-up problems. We analyze several cases, including the EIC's cotton
textile venture, the famous Opium Monopoly, and present-day contract
farming.
Article Full-Text Access
Full-text Article
Authors
Kranton, Rachel (Duke U)
Swamy, Anand V. (Williams College)
Swamy, Anand V. (Williams College)
JEL Classifications
D86: Economics of Contract: Theory
L67: Other Consumer Nondurables
O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
O19: International Linkages to Development; Role of International Organizations
Q13: Agricultural Markets and Marketing; Cooperatives; Agribusiness
N65: Economic History: Manufacturing and Construction: Asia including Middle East
N75: Economic History: Transport, Trade, Energy, Technology, and Other Services: Asia including Middle East
L67: Other Consumer Nondurables
O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
O19: International Linkages to Development; Role of International Organizations
Q13: Agricultural Markets and Marketing; Cooperatives; Agribusiness
N65: Economic History: Manufacturing and Construction: Asia including Middle East
N75: Economic History: Transport, Trade, Energy, Technology, and Other Services: Asia including Middle East
