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Trade and insecure resources

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  • Garfinkel, Michelle R.
  • Skaperdas, Stergios
  • Syropoulos, Constantinos

Abstract

We construct a model of conflict and trade to study the consequences of interstate disputes over contested resources (land, oil, water or other resources) for arming, welfare and trade flows. 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 it brings swamp the traditional gains from trade and thus render autarky more desirable for one or all rival states. Free trade, though, is always an equilibrium, and sometimes is a dominant one with features of a prisoner's dilemma outcome. 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.

Suggested Citation

  • Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2015. "Trade and insecure resources," Journal of International Economics, Elsevier, vol. 95(1), pages 98-114.
  • Handle: RePEc:eee:inecon:v:95:y:2015:i:1:p:98-114
    DOI: 10.1016/j.jinteco.2014.10.001
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    Citations

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    Cited by:

    1. Garfinkel, Michelle R. & Syropoulos, Constantinos, 2015. "Trade openness and the settlement of domestic disputes in the shadow of the future," Research in Economics, Elsevier, vol. 69(2), pages 191-213.
    2. Frederick van der Ploeg, 2012. "Resource Wars and Confiscation Risk," OxCarre Working Papers 097, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    3. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    4. Vincenzo Bove & Claudio Deiana & Roberto Nisticò, 2016. "Global Arms Trade and Oil Dependence," CSEF Working Papers 452, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 10 Feb 2018.
    5. Michelle R. Garfinkel & Constantinos Syropoulos, 2015. "Trading with the Enemy," Working Papers 151603, University of California-Irvine, Department of Economics, revised Sep 2017.
    6. Harrison, Mark, 2013. "The Economics of Coercion and Conflict: an Introduction," CAGE Online Working Paper Series 151, Competitive Advantage in the Global Economy (CAGE).
    7. 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.
    8. Hasan, Md Didarul & Lahiri, Sajal, 2015. "A two-period model of natural resources and inter-country conflicts: Effects of trade sanctions," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 5(2), pages 76-100.
    9. Jonathan J Adams, 2017. "The Rise and Fall of Armies," Working Papers 001002, University of Florida, Department of Economics.

    More about this item

    Keywords

    Trade openness; Property rights; Interstate disputes; Conflict; Security policies;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F10 - International Economics - - Trade - - - General
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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