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Globalization and Domestic Conflict

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  • Michelle R. Garfinkel

    (University of California-Irvine)

  • Stergios Skaperdas

    (University of California-Irvine)

  • Constantinos Syropoulos

    (Florida International University)

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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Bibliographic 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
Date of revision:
Handle: RePEc:wpa:wuwpit:0507005

Note: Type of Document - pdf; pages: 37
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Web page: http://128.118.178.162

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

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References

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  1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
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Citations

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Cited by:
  1. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
    ," MPRA Paper 16473, University Library of Munich, Germany.
  2. Caleb Stroup & Benjamin Zissimos, 2011. "Pampered Bureaucracy, Political Stability, and Trade Integration," Vanderbilt University Department of Economics Working Papers 1105, Vanderbilt University Department of Economics.
  3. 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.
  4. Thierry Verdier, 2010. "Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  5. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics 701, Boston College Department of Economics.
  6. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  7. Caruso Raul, 2011. "On the Nature of Peace Economics," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(2), pages 1-13, January.
  8. Caruso, Raul, 2011. "International Relative Prices and Civil Wars in Sub-Saharan Africa. Theory and Evidence over the period (1995-2006)," MPRA Paper 29761, University Library of Munich, Germany.
  9. Garfinkel , Michelle & Skaperdas, Stergios & Syropoulos, Constantinos, 2012. "Trade and Insecure Resources: Implications for Welfare and Comparative Advantage," School of Economics Working Paper Series 2012-8, LeBow College of Business, Drexel University.
  10. Mahvash Saeed Qureshi, 2009. "Trade and Thy Neighbor's War," IMF Working Papers 09/283, International Monetary Fund.
  11. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  12. Stauvermann Peter J., 2012. "Accumulation and Growth in the Shadow of Conflicts," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(1), pages 1-30, April.
  13. Rigterink, Anouk S., 2011. "Diamonds and violence in Africa. Uncovering relationships and mechanisms," MPRA Paper 45235, University Library of Munich, Germany.
  14. Vincenzo Bove & Leandro Elia & Petros G. Sekeris, 2013. "U.S. Security Strategy and the Gains from Bilateral Trade," Working Papers 1302, University of Namur, Department of Economics.
  15. Raul Caruso, 2012. "Differentials in property Rights in a two-sector economy," Revue d'économie politique, Dalloz, vol. 122(2), pages 257-278.
  16. Sajal Lahiri & Valerica Vlad, 2012. "Peace Dividends in a Trade-theoretic Model of Conflict," Economics Bulletin, AccessEcon, vol. 32(1), pages 737-745.
  17. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2011. "Trade and Insecure Resources," Working Papers 111201, University of California-Irvine, Department of Economics, revised Sep 2013.
  18. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2010. "Trade in the Shadow of Power," Working Papers 101105, University of California-Irvine, Department of Economics, revised Jan 2011.
  19. 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.

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