Financial Inclusion in Papua New Guinea
Intratemporal Trade: allocation of HH resources: distance
⚫ household lives a distance d away from markets
⚫ add ad valorem transport costs to goods, (1+ d) p (j)
▸ incurs this cost itself, or pays a higher price for delivered good
⚫ not being Fl means HH's wages are diminished due to transaction
frictions/costs t (d): wage received w/ (1+t (d))
▸ t t (0) = 0, t' (d) > 0.
▸ justification: costs of delivering cash (middlemen, stealing)
⚫ Hence, while labor can be converted into goods by firm j at rate
w/p(j) = 1/ae (j),
⚫ Non-FI HHs located distance d from market, rate at which labor can
be converted into goods is given by
W
p (j) (1+ d) (1+t(d))
cut-off good, jr, determined by
1
ae (1+d) (1+t(d))
(1+d) (1+t(d))
a (ji)
=
a² (1 + d) (1+ t(d))
Davies & Nettuno
Financial Inclusion in Papua New Guinea
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August 4, 2022
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