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Arming in the global economy: The importance of trade with enemies and friends
Journal article   Open access   Peer reviewed

Arming in the global economy: The importance of trade with enemies and friends

Michelle R. Garfinkel, Constantinos Syropoulos and Yoto V. Yotov
Journal of international economics, v 123, 103295
Mar 2020
DOI: https://doi.org/10.1016/j.jinteco.2020.103295
Featured in Collection :   UN Sustainable Development Goals @ Drexel
url
https://escholarship.org/uc/item/8b24x5m5View
SubmittedOpen Access (License Unspecified),  Open

Abstract

Arming Comparative advantage Conflict Interstate disputes Resource insecurity Trade openness
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 two adversaries reduces each one's incentive to arm given the opponent's arming. If these countries have a sufficiently similar mix of initial resource endowments, greater trade openness brings with it a reduction in resources diverted to conflict and thus wasted, as well as the familiar gains from trade. Although a move to trade can otherwise induce greater arming by one country and thus need not be welfare improving for both, aggregate arming falls. By contrast, when the two adversaries 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, inducing greater arming. With data from the years surrounding the end of the Cold War, we exploit the contrasting implications of trade costs between enemies versus trade costs between friends to provide some suggestive evidence in support of the theory.

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16 citations in Web of Science
17 citations in Scopus

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#16 Peace, Justice and Strong Institutions

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Collaboration types
Domestic collaboration
Web of Science research areas
Economics
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