Trade and Security, I: Anarchy
AbstractMarket exchange is subject to an endogenously-determined level of predation which impedes specialization and gains from trade. Utility-maximizing agents opt between careers in specialized production and careers in predation. Three types of equilibria may emerge, autarky (with no predation and no defense), an insecure exchange equilibrium (with predation and defense), or a secure exchange equilibrium (in which defense completely deters predation). We analyze the influence of key parameters on the type of equilibrium which emerges. We also analyze changes in the welfare of groups of agents (the predators and specialized producers in both the richer region and the poorer region) as exogenous shocks occur in the technology of security. Since changes in security have terms of trade effects, some producers may be hurt by enhanced security. We show cases of 'immiserizing security' in which large poor countries are harmed by increased security.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 477.
Length: 36 pages
Date of creation: May 1997
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Trade; Economic Equilibrium;
Other versions of this item:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- F10 - International Economics - - Trade - - - General
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