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Trading with the Enemy

Author

Listed:
  • Garfinkel, Michelle

    (University of California, Irvine)

  • Syropoulos, Constantinos

    (Drexel University)

Abstract

We analyze how trade openness matters for interstate conflict over productive resources. Our analysis features a terms-of-trade channel that makes security policies trade-regime dependent. Specifically, trade between adversarial countries reduces their incentives to arm given the opponent's arming. If they have a sufficiently similar mix of initial resource endowments, a move to trade brings with it a reduction in resources diverted to conflict and thus wasted, as well as the familiar gains from trade. Otherwise, a move to trade can induce greater arming by one of them and thus need not be welfare improving for both. Moreover, when the two adversarial countries do not trade with each other but instead trade with a third (friendly) country, a move from autarky to trade intensifies conflict between the two adversaries. Building on the welfare implications, we also analyze the endogenous choice of trade regimes

Suggested Citation

  • Garfinkel, Michelle & Syropoulos, Constantinos, 2016. "Trading with the Enemy," School of Economics Working Paper Series 2016-13, LeBow College of Business, Drexel University, revised 25 Sep 2017.
    • Handle: RePEc:ris:drxlwp:2016_013
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    Other versions of this item:

    • Michelle R. Garfinkel & Constantinos Syropoulos, 2015. "Trading with the Enemy," Working Papers 151603, University of California-Irvine, Department of Economics, revised Sep 2017.

    References listed on IDEAS

    as
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    Cited by:

    1. Mehrdad Vahabi, 2020. "Introduction: a symposium on the predatory state," Public Choice, Springer, vol. 182(3), pages 233-242, March.
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    3. Martin McGuire, 2017. "Introduction and Notes to Garfinkel-Syropoulos: "Trading with the Enemy"," Working Papers 171802, University of California-Irvine, Department of Economics.
    4. Martin C. McGuire, 2020. "Trade and the predatory state: Ricardian exchange with armed competition for resources—a diagrammatic exposition," Public Choice, Springer, vol. 182(3), pages 459-494, March.

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    More about this item

    Keywords

    resource insecurity; interstate disputes; conflict; trade openness; comparative advantage;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - 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
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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