Arming in the global economy: The importance of trade with enemies and friends
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...
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Published in | Journal of international economics Vol. 123; p. 103295 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
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Elsevier B.V
01.03.2020
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Abstract | 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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AbstractList | 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. |
ArticleNumber | 103295 |
Author | Syropoulos, Constantinos Garfinkel, Michelle R. Yotov, Yoto V. |
Author_xml | – sequence: 1 givenname: Michelle R. surname: Garfinkel fullname: Garfinkel, Michelle R. email: mrgarfin@uci.edu organization: University of California, Irvine, Irvine, CA, United States of America – sequence: 2 givenname: Constantinos surname: Syropoulos fullname: Syropoulos, Constantinos email: c.syropoulos@drexel.edu organization: Drexel University, Philadelphia, PA, United States of America – sequence: 3 givenname: Yoto V. surname: Yotov fullname: Yotov, Yoto V. email: yotov@drexel.edu organization: Drexel University and ifo Institute, Philadelphia, PA, United States of America |
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Keywords | D30 D74 Interstate disputes F52 Arming F51 F10 Conflict Resource insecurity Comparative advantage Trade openness |
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SubjectTerms | Arming Comparative advantage Conflict Interstate disputes Resource insecurity Trade openness |
Title | Arming in the global economy: The importance of trade with enemies and friends |
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