Trade and Insecure Resources: Implications for Welfare and Comparative Advantage
AbstractWe augment the canonical neoclassical model of trade to allow for interstate disputes over land, oil, water, or other resources. Different trade regimes imply different costs of such disputes in terms of arming. Depending on world prices, free trade can intensify arming to such an extent that the additional security costs swamp the traditional gains from trade and thus render autarky more desirable for one or all rival states. Furthermore, contestation of resources can reverse a country's apparent comparative advantage relative to its comparative advantage in the absence of conflict. And, where such conflict is present, comparisons of autarkic prices to world prices could be inaccurate predictors of trade patterns.
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Bibliographic InfoPaper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2012-8.
Length: 46 pages
Date of creation: 08 Jul 2012
Date of revision:
trade openness; property rights; interstate disputes; conflict; security policies.;
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 - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F10 - International Economics - - Trade - - - General
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