Trade and insecure resources

Michelle Garfinkel, Stergios Skaperdas and Constantinos Syropoulos ()

Journal of International Economics, 2015, vol. 95, issue 1, 98-114

Abstract: We construct a model of conflict and trade to study the consequences of interstate disputes over contested resources (land, oil, water or other resources) for arming, welfare and trade flows. 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 it brings swamp the traditional gains from trade and thus render autarky more desirable for one or all rival states. Free trade, though, is always an equilibrium, and sometimes is a dominant one with features of a prisoner's dilemma outcome. 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.

Keywords: Trade openness; Property rights; Interstate disputes; Conflict; Security policies (search for similar items in EconPapers)
JEL-codes: D30 D74 F10 F51 F52 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (26)

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Working Paper: Trade and Insecure Resources (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:95:y:2015:i:1:p:98-114

DOI: 10.1016/j.jinteco.2014.10.001

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