Globalization and Domestic Conflict

Michelle R Garfinkel (), Stergios Skaperdas and Constantinos Syropoulos ()

Abstract: 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.'

Keywords: globalization; trade openness; property rights; enforcement; insecurity; civil war (search for similar items in EconPapers)
JEL-codes: D30 D70 D72 D74 F10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-int
Date: Written 2005-07-28
Note: Type of Document - pdf; pages: 37
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http://129.3.20.41/eps/it/papers/0507/0507005.pdf (application/pdf)

Related works:
Working Paper: Globalization and Domestic Conflict (2006)
Working Paper: Globalization and Domestic Conflict (2005)
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