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Kranton, Rachel, and
Anand V. Swamy. 2008. "Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India."
,
98(3): 967-89.
Show Article Details
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.
Authors:
Kranton, Rachel (Duke U)
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
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