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Globalization and Domestic Conflict

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Author Info
Michelle R. Garfinkel (University of California-Irvine)
Stergios Skaperdas (University of California-Irvine)
Constantinos Syropoulos (Florida International University)

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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 ('guns'). 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.'

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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0507005.

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Length: 37 pages
Date of creation: 28 Jul 2005
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Handle: RePEc:wpa:wuwpit:0507005

Note: Type of Document - pdf; pages: 37
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Web page: http://129.3.20.41

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Related research
Keywords: globalization; trade openness; property rights; enforcement; insecurity; civil war;

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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
F10 - International Economics - - Trade - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  2. Dani Rodrik, 1998. "Where Did All The Growth Go? External Shocks, Social Conflict, and Growth Collapses," NBER Working Papers 6350, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Pedro DalBo & Ernesto DalBo, 2004. "Workers, Warriors and Criminals: Social Conflict in General Equilibrium," Working Papers 2004-11, Brown University, Department of Economics. [Downloadable!]
    Other versions:
  4. Brander, James A. & Scott Taylor, M., 1998. "Open access renewable resources: Trade and trade policy in a two-country model," Journal of International Economics, Elsevier, vol. 44(2), pages 181-209, April. [Downloadable!] (restricted)
    Other versions:
  5. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September. [Downloadable!] (restricted)
  6. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April. [Downloadable!] (restricted)
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  7. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
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  8. Roland Hodler, 2004. "The Curse of Natural Resources in Fractionalized Countries," Diskussionsschriften dp0404, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
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  9. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January. [Downloadable!] (restricted)
  11. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," Development and Comp Systems 0210003, EconWPA. [Downloadable!]
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  12. 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. [Downloadable!] (restricted)
  13. Gregory D. Hess, 2003. "The Economic Welfare Cost of Conflict: An Empirical Assessment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  14. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, vol. 91(2), pages 353-357, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," Working Papers 080921, University of California-Irvine, Department of Economics. [Downloadable!]
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  2. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2008. "Globalization and Insecurity: Reviewing Some Basic Issues," Working Papers 080901, University of California-Irvine, Department of Economics. [Downloadable!]
  3. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006. [Downloadable!]
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