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Peace Dividends in a Trade-theoretic Model of Conflict

Author

Listed:
  • Sajal Lahiri

    (Southern Illinois University Carbondale)

  • Valerica Vlad

    (Penn State Erie)

Abstract

We construct a trade-theoretic model for three open economies two of which are in conflict with each other and the third is the source of foreign investments to the two warring countries. War efforts — which involve the use of soldiers — is determined endogenously. The purpose of war is the capture of land, but the costs are production sacrificed, reduced flow of foreign investments, and general disruptions in the economy. We examine the effect of a bilateral piecemeal reduction in war efforts on the level of foreign investments and on welfare in the three countries. We find positive effects on all fronts.

Suggested Citation

  • Sajal Lahiri & Valerica Vlad, 2012. "Peace Dividends in a Trade-theoretic Model of Conflict," Economics Bulletin, AccessEcon, vol. 32(1), pages 737-745.
    • Handle: RePEc:ebl:ecbull:eb-11-00764
    as

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    References listed on IDEAS

    as
    1. Zsolt Becsi and Sajal Lahiri, 2007. "Bilateral war in a multilateral world: carrots and sticks for conflict resolution," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1168-1187, November.
    2. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008. "Globalization and domestic conflict," Journal of International Economics, Elsevier, vol. 76(2), pages 296-308, December.
    3. Kristian Gleditsch, 2004. "A Revised List of Wars Between and Within Independent States, 1816-2002," International Interactions, Taylor & Francis Journals, vol. 30(3), pages 231-262, July.
    4. 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, February.
    5. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
    6. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, vol. 91(2), pages 353-357, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    War; peace dividend; foreign investment.;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H8 - Public Economics - - Miscellaneous Issues

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