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International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined

Author

Listed:
  • Michelle R. Garfinkel
  • Stergios Skaperdas
  • Constantinos Syropoulos

Abstract

We augment the canonical neoclassical model of trade to allow for interstate disputes over land, oil, water, or other resources. The costs of such disputes in terms of arming depend on the trade regime in place. Under either autarky or free trade, the larger country (in terms of factor endowments) need not to be more powerful. Yet, under free trade, there is a stronger tendency for arming incentives to be equalized and thus for a “leveling of the playing field.” Depending on world prices, free trade can intensify arming incentives to such an extent that the additional security costs swamp the traditional gains from trade and thus render autarky more desirable for one or both 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.

Suggested Citation

  • Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," CESifo Working Paper Series 2680, CESifo.
  • Handle: RePEc:ces:ceswps:_2680
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    Cited by:

    1. Mehlum, Halvor & Ove Moene, Karl, 2011. "Aggressive elites and vulnerable entrepreneurs - trust and cooperation in the shadow of conflict," Memorandum 16/2010, Oslo University, Department of Economics.
    2. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo.
    3. Dixit, Avinash, 2015. "Governance, trade, and investment," Research in Economics, Elsevier, vol. 69(2), pages 166-179.
    4. Avinash Dixit, 2011. "International Trade, Foreign Direct Investment, and Security," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 191-213, September.
    5. Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski & Pierre Yared, 2012. "A Dynamic Theory of Resource Wars," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 283-331.
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    7. Ansink, Erik, 2010. "Refuting two claims about virtual water trade," Ecological Economics, Elsevier, vol. 69(10), pages 2027-2032, August.
    8. Elton Beqiraj & Silvia Fedeli & Luisa Giuriato, 2019. "How do organized crime and counterfeit interact in Italian trading firms? An empirical analysis of their effects on trade," Working Papers 187, University of Rome La Sapienza, Department of Public Economics.

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    More about this item

    Keywords

    trade openness; property rights; interstate disputes; conflict; security policies;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General

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