Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93814
Authors: 
Seitz, Michael
Tarasov, Alexander
Zakharenko, Roman
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper 404
Abstract: 
This paper develops a quantitative model of trade, military conflicts, and defense spending. Trade liberalization between two countries reduces probability of an armed conflict between them, causing both to cut defense spending. This in turn causes a domino effect on defense spending by other countries. As a result, both countries and the rest of the world are better off. We estimate the model using data on trade, conflicts, and military spending. We find that, after reduction of costs of trade between a pair of hostile countries, the welfare effect of worldwide defense spending cuts is comparable in magnitude to the direct welfare gains from trade.
Subjects: 
general equilibrium
gains from trade
defense spending
JEL: 
C5
C6
F13
F51
H56
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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