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Globalization and Domestic Conflict

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  • Michelle R. Garfinkel

    ()
    (Department of Economics, University of California-Irvine)

  • Stergios Skaperdas

    ()
    (Department of Economics, University of California-Irvine)

  • Constantinos Syropoulos

    ()
    (Department of Economics and International Business, Drexel University)

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 (“gunsâ€). 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, exporters of the contested resource lose under free trade, unless the world price of the resource is sufficiently high. Regardless of what price obtains in the world market, 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 reverses the country’s comparative advantage. For an even wider range of prices, an increase in the international price of the contested resource reduces welfare, an instance of the “natural resource curse.â€

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Bibliographic Info

Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050601.

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Length: 44 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:irv:wpaper:050601

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Keywords: Globalization; Trade openness; Property rights; Enforcement; Insecurity; Civil wars;

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References

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Citations

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

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