Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316916 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11802
Publisher: 
CESifo GmbH, Munich
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.
Subjects: 
interstate war
armed peace
unarmed peace
security policies
gains from trade
shadow of the future.
JEL: 
C72
C78
D30
D70
D74
F10
F51
F60
Document Type: 
Working Paper
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