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Trade and Insecure Resources: Implications for Welfare and Comparative Advantage

Author

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  • Garfinkel , Michelle

    (Department of Economics University of California-Irvine)

  • Skaperdas, Stergios

    (Department of Economics University of California-Irvine)

  • Syropoulos, Constantinos

    (Department of Economics & International Business LeBow College of Business Drexel University)

Abstract

We augment the canonical neoclassical model of trade to allow for interstate disputes over land, oil, water, or other resources. Different trade regimes imply different costs of such disputes in terms of arming. Depending on world prices, free trade can intensify arming to such an extent that the additional security costs swamp the traditional gains from trade and thus render autarky more desirable for one or all 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

  • Garfinkel , Michelle & Skaperdas, Stergios & Syropoulos, Constantinos, 2012. "Trade and Insecure Resources: Implications for Welfare and Comparative Advantage," School of Economics Working Paper Series 2012-8, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2012_008
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    References listed on IDEAS

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    1. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008. "Globalization and domestic conflict," Journal of International Economics, Elsevier, vol. 76(2), pages 296-308, December.
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    Cited by:

    1. Roberto Bonfatti, 2012. "Trade and the Pattern of European Imperialism, 1492-2000," Economics Series Working Papers 618, University of Oxford, Department of Economics.
    2. Frederick van der Ploeg, 2017. "Rapacious Oil Exploration in face of Regime Switches: Breakthrough Renewable Energy and Dynamic Resource Wars," Development Working Papers 415, Centro Studi Luca d'Agliano, University of Milano.

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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
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F10 - International Economics - - Trade - - - General

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