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Trade and Insecure Resources: Implications for Welfare and Comparative Advantage

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Author Info

  • Garfinkel , Michelle

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

  • Skaperdas, Stergios

    (Department of Economics University of California-Irvine)

  • Syropoulos, Constantinos

    (Department of Economics & International Business LeBow College of Business Drexel University)

Abstract

We 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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File URL: http://dl.dropboxusercontent.com/u/162210677/RePEc/drx/wpaper/LeBow%20College%20of%20Business%20Working%20Paper%202012-8.pdf
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Bibliographic Info

Paper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2012-8.

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Length: 46 pages
Date of creation: 08 Jul 2012
Date of revision:
Handle: RePEc:ris:drxlwp:2012_008

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Web page: http://www.lebow.drexel.edu/
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Keywords: trade openness; property rights; interstate disputes; conflict; security policies.;

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  1. Daron Acemoglu & Michael Golosov & Aleh Tsyvinski & Pierre Yared, 2011. "A Dynamic Theory of Resource Wars," Levine's Working Paper Archive 661465000000001171, David K. Levine.
  2. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
  3. Shogren, Jason & Margolis, Michael, 2002. "Unprotected Resources and Voracious World Markets," Discussion Papers dp-02-30, Resources For the Future.
  4. James E. Anderson & Douglas Marcouiller, S.J., 1997. "Anarchy and Autarky: Endogenous Predation as a Barrier to Trade," Boston College Working Papers in Economics 383, Boston College Department of Economics, revised 01 Oct 2001.
  5. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  6. James A. Brander & M. Scott Taylor, 1995. "International Trade and Open Access Renewable Resources: The Small Open Economy Case," NBER Working Papers 5021, National Bureau of Economic Research, Inc.
  7. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  8. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
  9. James Brander & M. Scott Taylor, 1997. "International Trade Between Consumer and Conservationist Countries," NBER Working Papers 6006, National Bureau of Economic Research, Inc.
  10. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," International Trade 0507005, EconWPA.
  11. Acemoglu, Daron & Jensen, Martin Kaae, 2013. "Aggregate comparative statics," Games and Economic Behavior, Elsevier, vol. 81(C), pages 27-49.
  12. Rowe, David M., 1999. "World Economic Expansion and National Security in Pre–World War I Europe," International Organization, Cambridge University Press, vol. 53(02), pages 195-231, March.
  13. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  14. Anderton, Charles H & Anderton, Roxane A & Carter, John R, 1999. "Economic Activity in the Shadow of Conflict," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 166-79, January.
  15. Hotte, Louis & Long, Ngo Van & Tian, Huilan, 2000. "International trade with endogenous enforcement of property rights," Journal of Development Economics, Elsevier, vol. 62(1), pages 25-54, June.
  16. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
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Cited by:
  1. Roberto Bonfatti, 2013. "Trade and the Pattern of European Imperialism, 1492-2000," Discussion Papers 2013-01, University of Nottingham, GEP.

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