Trade Policy in the Shadow of Power
Abstract: Does military coercion affect the trade policies governments adopt in times of peace? Here, I marry a simple domestic political economy of trade, inspired by Grossman and Helpman (1994, 1995), with an international model of bargaining and war (Fearon 1995). I then explore how changes in economic and political primitives affect the bargaining environment when governments have both militarized and non-militarized tools to pursue their policy objectives. The model demonstrates that the magnitude of bilateral conflicts of interest and governments’ optimal level of military investment vary dramatically as a function of whose welfare the governments maximize. Those that value social welfare generate smaller externalities, yielding largely harmonious and unmilitarized international relations, while those that maximize rents seek to impose large externalities on their neighbors and maintain large militaries. The model provides firm political-economic foundations for other studies linking government bias to patterns of international conflict (Lake 1992, Jackson and Morelli 2007).
Works in Progress
- Prohibition, Theft, and Violence: Monopolistic Pricing and Exchange in Illicit Markets (with Colin Krainin and Kristopher Ramsay)