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Trade and Security,I: Anarchy

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  • James E. Anderson
  • Douglas Marcouiller

Abstract

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.

Suggested Citation

  • James E. Anderson & Douglas Marcouiller, 1997. "Trade and Security,I: Anarchy," NBER Working Papers 6223, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6223
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    References listed on IDEAS

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    Cited by:

    1. Daniel Mirza & Thierry Verdier, 2014. "Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports," Journal of Conflict Resolution, Peace Science Society (International), vol. 58(6), pages 943-975, September.
    2. Bos, Dieter & Kolmar, Martin, 2003. "Anarchy, efficiency, and redistribution," Journal of Public Economics, Elsevier, vol. 87(11), pages 2431-2457, October.
    3. Martin Kolmar, 2002. "An Analysis of Institutional Change in the European Union with an Application to Social Policy," Discussion Papers of DIW Berlin 282, DIW Berlin, German Institute for Economic Research.
    4. Bos, Dieter & Kolmar, Martin, 2003. "Anarchy, efficiency, and redistribution," Journal of Public Economics, Elsevier, vol. 87(11), pages 2431-2457, October.
    5. Mirza, Daniel & Verdier, Thierry, 2006. "International trade, security, and transnational terrorism : theory and empirics," Policy Research Working Paper Series 4093, The World Bank.
    6. Aviral Kumar Tiwari & Mamoni Kalita, 2011. "Governance and Foreign Aid in ASIAN Countries," Economics Bulletin, AccessEcon, vol. 31(1), pages 453-465.
    7. Raul Caruso, 2005. "A Very Simple Model of Conflict with Asymmetric Evaluations and Institutional Constraint," Public Economics 0510011, EconWPA.
    8. Sekkat, Khalid, 2012. "Manufactured Exports and FDI in Southern Mediterranean Countries: Evolution, determinants and prospects," CEPS Papers 6849, Centre for European Policy Studies.
    9. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.
    10. 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.
    11. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    12. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot Be Divorced from Its Governance," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 135-162, July.
    13. De Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010. "Terrorism Networks and Trade: Does the Neighbor Hurt?," CEPREMAP Working Papers (Docweb) 1017, CEPREMAP.
    14. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
    15. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
    16. James E. Anderson, 1999. "Why Do Nations Trade (So Little)?," Boston College Working Papers in Economics 428, Boston College Department of Economics.
    17. Azmat Gani & Biman Chand Prasad, 2006. "Institutional Quality and Trade in Pacific Island Countries," Working Papers 2006, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    18. Martin Kolmar, 2003. "An Analysis of Institutional Change in the European Union," European Journal of Law and Economics, Springer, vol. 16(3), pages 303-326, November.
    19. Azmat Gani, 2009. "Governance and foreign aid in Pacific Island countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(1), pages 112-125.
    20. Anderton, Charles H., 1999. "Appropriation possibilities in a simple exchange economy," Economics Letters, Elsevier, vol. 63(1), pages 77-83, April.
    21. Enrico Spolaore, 2004. "Economic Integration, International Conflict and Political Unions," Rivista di Politica Economica, SIPI Spa, vol. 94(5), pages 3-50, September.

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F1 - International Economics - - Trade

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