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Economics of Conflict: An Overview

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Author Info
Michelle R. Garfinkel () (Department of Economics, University of California-Irvine)
Stergios Skaperdas () (Department of Economics, University of California-Irvine)

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Abstract

In this chapter, we review the recent literature on conflict and appropriation. Allowing for the possibility of conflict, which amounts to recognizing the possibility that property rights are not perfectly and costlessly enforced, represents a significant departure from the traditional paradigm of economics. The research we emphasize, however, takes an economic perspective. Specifically, it applies conventional optimization techniques and game-theoretic tools to study the allocation of resources among competing activities— productive and otherwise appropriative, such as grabbing the product and wealth of others as well as defending one’s own product and wealth. In contrast to other economic activities in which inputs are combined cooperatively through production functions, the inputs to appropriation are combined adversarially through technologies of conflict. A central objective of this research is to identify the effects of conflict on economic outcomes: the determinants of the distribution of output (or power) and how an individual party’s share can be inversely related to its marginal productivity; when settlement in the shadow of conflict and when open conflict can be expected to occur, with longer time horizons capable of inducing conflict instead of settlement; how conflict and appropriation can reduce the appeal of trade; the determinants of alliance formation and the importance of intra-alliance commitments; how dynamic incentives for capital accumulation and innovation are distorted in the presence of conflict; and the role of governance in conflict management.

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Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050623.

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Length: 66 pages
Date of creation: Apr 2006
Date of revision: Sep 2006
Handle: RePEc:irv:wpaper:050623

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Postal: Irvine, CA 92697-3125
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Related research
Keywords: Anarchy; Bargaining; Conflict technology; Economic growth; Exchange; Governance; Group formation; Open conflict; Power; Shadow of the future;

Other versions of this item:

Find related papers by JEL classification:
D30 - Microeconomics - - Distribution - - - General
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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