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Trade and Insecure Resources: Implications for Welfare and Comparative Advantage

  • 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)

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.

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Paper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2012-8.

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Length: 46 pages
Date of creation: 08 Jul 2012
Date of revision:
Handle: RePEc:ris:drxlwp:2012_008
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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.
  2. Acemoglu, Daron & Jensen, Martin Kaae, 2009. "Aggregate Comparative Statics," CEPR Discussion Papers 7254, C.E.P.R. Discussion Papers.
  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, 02.
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  6. Shogren, Jason & Margolis, Michael, 2002. "Unprotected Resources and Voracious World Markets," Discussion Papers dp-02-30, Resources For the Future.
  7. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  8. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  9. Anderton, Charles H & Anderton, Roxane A & Carter, John R, 1999. "Economic Activity in the Shadow of Conflict," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 166-79, January.
  10. James Brander & M. Scott Taylor, 1997. "International Trade Between Consumer and Conservationist Countries," NBER Working Papers 6006, National Bureau of Economic Research, Inc.
  11. Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers tep0107, Trinity College Dublin, Department of Economics.
  12. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
  13. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  14. Hotte, Louis & Long, Ngo Van & Tian, Huilan, 2000. "International trade with endogenous enforcement of property rights," Journal of Development Economics, Elsevier, vol. 62(1), pages 25-54, June.
  15. Daron Acemoglu & Michael Golosov & Aleh Tsyvinski & Pierre Yared, 2011. "A Dynamic Theory of Resource Wars," Levine's Working Paper Archive 661465000000001171, David K. Levine.
  16. Rowe, David M., 1999. "World Economic Expansion and National Security in Pre–World War I Europe," International Organization, Cambridge University Press, vol. 53(02), pages 195-231, March.
  17. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
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