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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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Related research

Keywords: trade openness; property rights; interstate disputes; conflict; security policies.;

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References

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  1. Acemoglu, Daron & Jensen, Martin Kaae, 2009. "Aggregate Comparative Statics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7254, C.E.P.R. Discussion Papers.
  2. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 12(1), pages 1-22, April.
  3. James E. Anderson & Douglas Marcouiller, S.J., 1997. "Anarchy and Autarky: Endogenous Predation as a Barrier to Trade," Boston College Working Papers in Economics, Boston College Department of Economics 383, Boston College Department of Economics, revised 01 Oct 2001.
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  7. James Brander & M. Scott Taylor, 1997. "International Trade Between Consumer and Conservationist Countries," NBER Working Papers 6006, National Bureau of Economic Research, Inc.
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  13. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 557.
  14. 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.
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Cited by:
  1. Roberto Bonfatti, 2012. "Trade and the Pattern of European Imperialism, 1492-2000," Economics Series Working Papers 618, University of Oxford, Department of Economics.

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