Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18974
Authors: 
Garfinkel, Michelle R.
Skaperdas, Stergios
Syropoulos, Constantinos
Year of Publication: 
2005
Series/Report no.: 
CESifo working papers 1510
Abstract: 
We examine how globalization affects trade patterns and welfare when conflict prevails domestically. We do so in a simple model of trade, in which a natural resource like oil is contested by competing groups using real resources (?guns?). Thus, conflict is viewed as ultimately stemming from imperfect property-rights enforcement. When comparing autarky with free trade in such a setting, the gains from trade have to be weighed against the possibly higher resource costs of conflict. We find that importers of the contested resource gain unambiguously. By contrast, countries exporting the contested resource will lose under free trade, unless the international price of the resource is sufficiently high. Regardless of what price obtains in international markets, countries tend to over-export the contested resource relative to what we would observe if there were no conflict; for some range of prices, the presence of conflict even inverts the country's comparative advantage. We find further that an increase in the international price of the contested resource over an even wider range reduces welfare, an instance of the ?natural resource curse.?
Subjects: 
globalization
trade openness
property rights
enforcement
insecurity
conflict
JEL: 
D78
D74
D72
K42
F10
F02
Document Type: 
Working Paper

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