Anarchy and Autarky: Endogenous Predation as a Barrier to Trade
Market exchange is subject to an endogenously determined level of predation which impedes specialization and gains from trade. We construct a model in which utility-maximizing agents opt between careers in production and careers in predation. Three types of equilibria may emerge: autarky (with no predation and no defense), insecure exchange equilibria (with predation and defense), and secure exchange equilibria (in which defense completely deters predation). Trading equilibria, two-thirds of them secure, are supported only in a narrow range of security parameter values. Since changes in the technologies of defense and predation have terms of trade effects, some producers may be hurt by enhanced security. We show cases of 'immiserizing security' in which producers in large poor countries are harmed by increased security.
|Date of creation:||01 Sep 1997|
|Date of revision:||01 Oct 2001|
|Publication status:||published in International Economic Review, 46, 189213, 2005.|
|Note:||This paper was previously circulated as "Trade and Security, I: Anarchy".|
|Contact details of provider:|| Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA|
Web page: http://fmwww.bc.edu/EC/
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