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Globalization and Domestic Conflict

Author

Listed:
  • Michelle R. Garfinkel

    () (Department of Economics, University of California-Irvine)

  • Stergios Skaperdas

    () (Department of Economics, University of California-Irvine)

  • Constantinos Syropoulos

    () (Department of Economics and International Business, Drexel 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."

Suggested Citation

  • Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2006. "Globalization and Domestic Conflict," Working Papers 050601, University of California-Irvine, Department of Economics.
  • Handle: RePEc:irv:wpaper:050601
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    References listed on IDEAS

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    More about this item

    Keywords

    Globalization; Trade openness; Property rights; Enforcement; Insecurity; Civil wars;
    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
    • F2 - International Economics - - International Factor Movements and International Business
    • F10 - International Economics - - Trade - - - General

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