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Trade Interdependence, Arming and the Choice between War and Peace

Author

Listed:
  • Michelle Garfinkel

    (University of California-Irvine)

  • Constantinos Syropoulos

    (School of Economics, Drexel University)

Abstract

We consider a dynamic setting where two countries with competing claims to a resource/asset first arm and then choose whether to resolve their dispute through war or peacefully through settlement. War precludes international trade and can be destructive, but also locks gains and eliminates arming costs in the future. By contrast, a peaceful resolution, possibly supported by arming, avoids destruction and allows for mutually advantageous trade; yet future settlements must be renegotiated under the threat of war. We characterize the conditions under which peace is stable and show that, depending on war’s destructiveness, time preferences, and the distribution of resource endowments, greater gains from trade can pacify international tensions, but possibly only for more uneven endowment distributions.

Suggested Citation

  • Michelle Garfinkel & Constantinos Syropoulos, 2025. "Trade Interdependence, Arming and the Choice between War and Peace," Working Papers 202511, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202511
    as

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    File URL: https://www.lebow.drexel.edu/sites/default/files/2025-04/202511-cgpa-trade-interdependence.pdf
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    References listed on IDEAS

    as
    1. Garfinkel, Michelle R. & Syropoulos, Constantinos & Yotov, Yoto V., 2020. "Arming in the global economy: The importance of trade with enemies and friends," Journal of International Economics, Elsevier, vol. 123(C).
    2. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
    3. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, February.
    4. Yang-Ming Chang & Manaf Sellak, 2019. "A game-theoretic analysis of international trade and political conflict over external territories," Public Choice, Springer, vol. 179(3), pages 209-228, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Michelle Garfinkel & Constantinos Syropoulos, 2025. "Interstate Conflict and International Trade," Working Papers 202510, Center for Global Policy Analysis, LeBow College of Business, Drexel University.

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    More about this item

    Keywords

    Interstate war; Armed peace; Unarmed peace; Security policies; Gains from trade; Shadow of the future;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D30 - Microeconomics - - Distribution - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - 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
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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