Trade and Insecure Resources: Implications for Welfare and Comparative Advantage

Michelle Garfinkel, Stergios Skaperdas and Constantinos Syropoulos ()

No 2012-8, School of Economics Working Paper Series from 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.

Keywords: trade openness; property rights; interstate disputes; conflict; security policies. (search for similar items in EconPapers)
JEL-codes: D30 D70 D72 D73 F02 F10 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2012-07-08
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2012_008

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