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Abstract
This paper shows how credit market failures can lead to large welfare losses in grain markets by inducing increased transport
for seasonal storage in locations with low credit costs. The burden of these welfare losses falls primarily on rural households.
These conclusions are obtained from a spatial/temporal model solved using a mixed complementarity formulation that easily
handles interest rate differentials across space. Efforts to address credit market failures and to improve the efficiency of rural
storage should be given priority as opposed to the creation of large, formal sector grain collection centers. © 2001 Elsevier
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