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Trade and Security, I: Anarchy

Author

Listed:
  • Anderson, James E.

    (Boston College and NBER)

  • Marcouiller, S.J. Douglas

    (Boston College)

Abstract

Market exchange is subject to an endogenously-determined level of predation which impedes specialization and gains from trade. Utility-maximizing agents opt between careers in specialized production and careers in predation. Three types of equilibria may emerge, autarky (with no predation and no defense), an insecure exchange equilibrium (with predation and defense), or a secure exchange equilibrium (in which defense completely deters predation). We analyze the influence of key parameters on the type of equilibrium which emerges. We also analyze changes in the welfare of groups of agents (the predators and specialized producers in both the richer region and the poorer region) as exogenous shocks occur in the technology of security. Since changes in security have terms of trade effects, some producers may be hurt by enhanced security. We show cases of 'immiserizing security' in which large poor countries are harmed by increased security.

Suggested Citation

  • Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series 477, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0477
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    References listed on IDEAS

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    Cited by:

    1. Daniel Mirza & Thierry Verdier, 2014. "Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports," Journal of Conflict Resolution, Peace Science Society (International), vol. 58(6), pages 943-975, September.
    2. Bos, Dieter & Kolmar, Martin, 2003. "Anarchy, efficiency, and redistribution," Journal of Public Economics, Elsevier, vol. 87(11), pages 2431-2457, October.
    3. Aviral Kumar Tiwari & Mamoni Kalita, 2011. "Governance and Foreign Aid in ASIAN Countries," Economics Bulletin, AccessEcon, vol. 31(1), pages 453-465.
    4. Raul Caruso, 2005. "A Very Simple Model of Conflict with Asymmetric Evaluations and Institutional Constraint," Public Economics 0510011, University Library of Munich, Germany.
    5. Sekkat, Khalid, 2012. "Manufactured Exports and FDI in Southern Mediterranean Countries: Evolution, determinants and prospects," CEPS Papers 6849, Centre for European Policy Studies.
    6. Mirza, Daniel & Verdier, Thierry, 2006. "International trade, security, and transnational terrorism : theory and empirics," Policy Research Working Paper Series 4093, The World Bank.
    7. Pierre‐Guillaume Méon & Khalid Sekkat, 2004. "Does the Quality of Institutions Limit the MENA's Integration in the World Economy?," The World Economy, Wiley Blackwell, vol. 27(9), pages 1475-1498, September.
    8. José de Sousa & Daniel Mirza & Thierry Verdier, 2010. "Terrorism Networks and Trade: Does the Neighor Hurt?," Working Papers 2010-04, CEPII research center.
    9. Anderton, Charles H., 1999. "Appropriation possibilities in a simple exchange economy," Economics Letters, Elsevier, vol. 63(1), pages 77-83, April.
    10. 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.
    11. Zahoor Ul Haq & Zia Ullah & Javed Iqbal, 2018. "Terrorist Incidents and Trade," Global Social Sciences Review, Humanity Only, vol. 3(2), pages 55-70, June.
    12. Azmat Gani & Biman Chand Prasad, 2006. "Institutional Quality and Trade in Pacific Island Countries," Working Papers 2006, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    13. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    14. Enrico Spolaore, 2004. "Economic Integration, International Conflict and Political Unions," Rivista di Politica Economica, SIPI Spa, vol. 94(5), pages 3-50, September.
    15. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot Be Divorced from Its Governance," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 135-162, July.
    16. Martin Kolmar, 2002. "An Analysis of Institutional Change in the European Union with an Application to Social Policy," Discussion Papers of DIW Berlin 282, DIW Berlin, German Institute for Economic Research.
    17. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.
    18. Bös, Dieter & Kolmar, Martin, 2000. "Anarchy, Efficiency and Redistribution," Bonn Econ Discussion Papers 10/2000, University of Bonn, Bonn Graduate School of Economics (BGSE).
    19. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
    20. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
    21. Azmat Gani & Biman Chand Prasad, 2006. "Institutional Quality and Trade in Pacific Island Countries," ARTNeT Working Papers 20, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    22. James E. Anderson, 1999. "Why Do Nations Trade (So Little)?," Boston College Working Papers in Economics 428, Boston College Department of Economics.
    23. Martin Kolmar, 2003. "An Analysis of Institutional Change in the European Union," European Journal of Law and Economics, Springer, vol. 16(3), pages 303-326, November.
    24. Azmat Gani, 2009. "Governance and foreign aid in Pacific Island countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(1), pages 112-125.

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    More about this item

    Keywords

    Trade; Economic Equilibrium;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F10 - International Economics - - Trade - - - General

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