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Globalization and Domestic Conflict

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  • Michelle R. Garfinkel
  • Stergios Skaperdas
  • Constantinos Syropoulos

Abstract

We examine how globalization affects trade patterns and welfare when conflict prevails domestically. We do so in a simple model of trade, in which a natural resource like oil is contested by competing groups using real resources (”guns”). Thus, conflict is viewed as ultimately stemming from imperfect property-rights enforcement. When comparing autarky with free trade in such a setting, the gains from trade have to be weighed against the possibly higher resource costs of conflict. We find that importers of the contested resource gain unambiguously. By contrast, countries exporting the contested resource will lose under free trade, unless the international price of the resource is sufficiently high. Regardless of what price obtains in international markets, countries tend to over-export the contested resource relative to what we would observe if there were no conflict; for some range of prices, the presence of conflict even inverts the country's comparative advantage. We find further that an increase in the international price of the contested resource over an even wider range reduces welfare, an instance of the "natural resource curse".

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1510.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1510

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Keywords: globalization; trade openness; property rights; enforcement; insecurity; conflict;

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References

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  1. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
  2. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  3. Dani Rodrik, 1998. "Where Did All The Growth Go? External Shocks, Social Conflict, and Growth Collapses," NBER Working Papers 6350, National Bureau of Economic Research, Inc.
  4. Jose Luis Evia & Roberto Laserna & Stergios Skaperdas, 2008. "Socio-Political Conflict and Eonomic Performance in Bolivia," Working Papers 070814, University of California-Irvine, Department of Economics.
  5. Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum 29/2002, Oslo University, Department of Economics.
  6. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, vol. 91(2), pages 353-357, May.
  7. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications, The World Bank, number 13938, October.
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  9. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
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  14. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  15. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
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  18. Brander, James A. & Scott Taylor, M., 1998. "Open access renewable resources: Trade and trade policy in a two-country model," Journal of International Economics, Elsevier, vol. 44(2), pages 181-209, April.
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Citations

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Cited by:
  1. Vincenzo Bove & Leandro Elia & Petros G. Sekeris, 2013. "U.S. Security Strategy and the Gains from Bilateral Trade," Working Papers 1302, University of Namur, Department of Economics.
  2. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics 701, Boston College Department of Economics.
  3. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2011. "Trade and Insecure Resources," Working Papers 111201, University of California-Irvine, Department of Economics, revised Sep 2013.
  4. Rigterink, Anouk S., 2011. "Diamonds and violence in Africa. Uncovering relationships and mechanisms," MPRA Paper 45235, University Library of Munich, Germany.
  5. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," Working Papers 080921, University of California-Irvine, Department of Economics.
  6. Qureshi, Mahvash Saeed, 2013. "Trade and thy neighbor's war," Journal of Development Economics, Elsevier, vol. 105(C), pages 178-195.
  7. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2010. "Trade in the Shadow of Power," Working Papers 101105, University of California-Irvine, Department of Economics, revised Jan 2011.
  8. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2008. "Globalization and Insecurity: Reviewing Some Basic Issues," Working Papers 080901, University of California-Irvine, Department of Economics.
  9. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
    ," MPRA Paper 16473, University Library of Munich, Germany.
  10. Thierry Verdier, 2010. "Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context," RSCAS Working Papers 2010/38, European University Institute.
  11. Caruso, Raul, 2011. "International Relative Prices and Civil Wars in Sub-Saharan Africa. Theory and Evidence over the period (1995-2006)," MPRA Paper 29761, University Library of Munich, Germany.
  12. Caruso Raul, 2011. "On the Nature of Peace Economics," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(2), pages 1-13, January.
  13. Stauvermann Peter J., 2012. "Accumulation and Growth in the Shadow of Conflicts," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(1), pages 1-30, April.
  14. Raul Caruso, 2012. "Differentials in property Rights in a two-sector economy," Revue d'économie politique, Dalloz, vol. 122(2), pages 257-278.
  15. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  16. Garfinkel , Michelle & Skaperdas, Stergios & Syropoulos, Constantinos, 2012. "Trade and Insecure Resources: Implications for Welfare and Comparative Advantage," School of Economics Working Paper Series 2012-8, LeBow College of Business, Drexel University.
  17. Caleb Stroup & Benjamin Zissimos, 2011. "Pampered Bureaucracy, Political Stability, and Trade Integration," Vanderbilt University Department of Economics Working Papers 1105, Vanderbilt University Department of Economics.
  18. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  19. Sajal Lahiri & Valerica Vlad, 2012. "Peace Dividends in a Trade-theoretic Model of Conflict," Economics Bulletin, AccessEcon, vol. 32(1), pages 737-745.

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