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Trade in the Shadow of Power
Book chapter

Trade in the Shadow of Power

Stergios Skaperdas, Constantinos Syropoulos and Michelle R Garfinkel
The Oxford Handbook of the Economics of Peace and Conflict
20 Apr 2012

Abstract

autarky comparative advantage Economic Development and Growth free trade insecure environments international trade Microeconomics
This article explores settings in which international trade takes place in insecure environments or, alternatively, in the shadow of power. The first setting focuses on the case of two countries when trade between them is itself insecure. There, the country that produces the more highly valued good tends to have a comparative disadvantage in arming, less power, and thus lower income. In a setting in which there is an insecure input, countries might prefer autarky to free trade, and that comparative advantage can be distorted relative to what would prevail in the absence of insecurity.

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