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The geopolitics of international trade in Southeast Asia

Author

Listed:
  • Kerem Cosar

    (University of Virginia)

  • Benjamin Thomas

    (University of Virginia)

Abstract

Motivated by the historically tense geopolitical situation in Southeast Asia, the paper simulates the potential closure of key maritime waterways in the region to predict the impact on trade and welfare. The authors generate initial (unobstructed) and counterfactual (rerouted) least-cost maritime paths between trading countries, and use the distances of these routes in a workhorse model of international trade to estimate welfare effects. They find heterogeneous and economically significant reductions in real GDP, and show the magnitude of welfare loss is directly correlated with military spending as a proportion of GDP, suggesting nations may be responding to economic security threats posed by such potential conflicts.

Suggested Citation

  • Kerem Cosar & Benjamin Thomas, 2021. "The geopolitics of international trade in Southeast Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 207-219, February.
  • Handle: RePEc:spr:weltar:v:157:y:2021:i:1:d:10.1007_s10290-020-00403-0
    DOI: 10.1007/s10290-020-00403-0
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    References listed on IDEAS

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    1. Feyrer, James, 2021. "Distance, trade, and income — The 1967 to 1975 closing of the Suez canal as a natural experiment," Journal of Development Economics, Elsevier, vol. 153(C).
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    More about this item

    Keywords

    International trade; Quantitative trade models; Military spending;
    All these keywords.

    JEL classification:

    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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