Trade in the Shadow of Power
In this chapter, we examine how some of the main results in international trade theory fare when we abandon the traditional assumption of third-party enforcement of property rights. Without such enforcement, countries arm and exercise power to secure resources used in production or to secure the output from that production. Because arming is endogenous and takes scarce resources to produce, the production of final goods is also endogenous. Consequently, prices in either domestic or international markets reflect not only preferences, endowments or technologies of production as predicted by traditional models, but also arming and the power that comes from that. As we show in the context of a Ricardian model, those countries that produce the most socially valued goods tend to arm less, giving them a "comparative disadvantage" in power. Accordingly, the level of welfare obtained by these countries could be lower than that obtained in a competitive economy with perfect security. In the context of a Heckscher-Ohlin model, we find that free trade need not be preferred to autarky, as the costs of conflict or self-enforcement swamp the familiar gains from trade for a certain range of world prices. Finally, trade in the shadow of power can distort comparative advantage.
|Date of creation:||Nov 2010|
|Date of revision:||Jan 2011|
|Contact details of provider:|| Postal: Irvine, CA 92697-3125|
Phone: (949) 824-5788
Web page: http://www.economics.uci.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2011.
"Trade and Insecure Resources,"
111201, University of California-Irvine, Department of Economics, revised Sep 2013.
- Pedro Dal BÃ³ & Ernesto Dal BÃ³, 2004.
"Workers, Warriors and Criminals: Social Conflict in General Equilibrium,"
Econometric Society 2004 North American Summer Meetings
642, Econometric Society.
- Ernesto Dal Bó & Pedro Dal Bó, 2011. "Workers, Warriors, And Criminals: Social Conflict In General Equilibrium," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 646-677, 08.
- Pedro DalBo & Ernesto DalBo, 2004. "Workers, Warriors and Criminals: Social Conflict in General Equilibrium," Working Papers 2004-11, Brown University, Department of Economics.
- Pedro Dal bÃ³, 2004. "Workers, Warriors and Criminals: Social Conflict in General Equilibrium," Econometric Society 2004 Latin American Meetings 341, Econometric Society.
- Michael McBride & Gary Milante & Stergios Skaperdas, 2009.
"Peace and War with Endogenous State Capacity,"
091002, University of California-Irvine, Department of Economics.
- Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008.
"Globalization and domestic conflict,"
Journal of International Economics,
Elsevier, vol. 76(2), pages 296-308, December.
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2006. "Globalization and Domestic Conflict," Working Papers 050601, University of California-Irvine, Department of Economics.
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," International Trade 0507005, EconWPA.
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," CESifo Working Paper Series 1510, CESifo Group Munich.
- Stergios Skaperdas & Constantinos Syropoulos, 2001.
"Guns, Butter, and Openness: On the Relationship between Security and Trade,"
American Economic Review,
American Economic Association, vol. 91(2), pages 353-357, May.
- Skaperdas, S. & Syropoulos, C., 2000. "Guns, Butter, and Openness: On The Relationship Between Security and Trade," Papers 00-01-23, California Irvine - School of Social Sciences.
- Francis Bloch, 2009. "Endogenous formation of alliances in conflicts," Working Papers hal-00435387, HAL.
- Skaperdas, Stergios & Syropoulos, Constantinos, 1997. "The Distribution of Income in the Presence of Appropriative Activities," Economica, London School of Economics and Political Science, vol. 64(253), pages 101-17, February.
When requesting a correction, please mention this item's handle: RePEc:irv:wpaper:101105. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer dos Santos)
If references are entirely missing, you can add them using this form.