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Globalization and Domestic Conflict

  • Michelle R. Garfinkel

    (University of California-Irvine)

  • Stergios Skaperdas

    (University of California-Irvine)

  • Constantinos Syropoulos

    (Florida International University)

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.'

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File URL: http://128.118.178.162/eps/it/papers/0507/0507005.pdf
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Paper provided by EconWPA in its series International Trade with number 0507005.

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Length: 37 pages
Date of creation: 28 Jul 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0507005
Note: Type of Document - pdf; pages: 37
Contact details of provider: Web page: http://128.118.178.162

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  1. 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.
  2. Rodrik, Dani, 1999. " Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
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  4. Shogren, Jason & Margolis, Michael, 2002. "Unprotected Resources and Voracious World Markets," Discussion Papers dp-02-30, Resources For the Future.
  5. Jose Luis Evia & Roberto Laserna & Stergios Skaperdas, 2008. "Socio-Political Conflict and Eonomic Performance in Bolivia," Working Papers 070814, University of California-Irvine, Department of Economics.
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  18. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
  19. 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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