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Trade Interdependence, Arming and the Choice Between War and Peace

Author

Listed:
  • Michelle R. Garfinkel
  • Constantinos Syropoulos

Abstract

We consider a dynamic setting where two countries with competing claims to a resource/asset first arm and then choose whether to resolve their dispute through war or peacefully through settlement. War precludes international trade and can be destructive, but also locks gains and eliminates arming costs in the future. By contrast, a peaceful resolution, possibly supported by arming, avoids destruction and allows for mutually advantageous trade; yet future settlements must be renegotiated under the threat of war. We characterize the conditions under which peace is stable and show that, depending on war’s destructiveness, time preferences, and the distribution of resource endowments, greater gains from trade can pacify international tensions, but possibly only for more uneven endowment distributions.

Suggested Citation

  • Michelle R. Garfinkel & Constantinos Syropoulos, 2025. "Trade Interdependence, Arming and the Choice Between War and Peace," CESifo Working Paper Series 11802, CESifo.
    • Handle: RePEc:ces:ceswps:_11802
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    More about this item

    Keywords

    interstate war; armed peace; unarmed peace; security policies; gains from trade; shadow of the future.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D30 - Microeconomics - - Distribution - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F10 - International Economics - - Trade - - - General
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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