Arms Trade and Conflict Resolution: A Trade-Theoretic Analysis

  • Sajal Lahiri
Part of the New Economic Windows book series (NEW)


We construct a trade-theoretic model for three open economies two of which are in conflict with each other and the third exports arms to the two warring countries. War efforts — which involve the use of soldiers and military hardware — and the price of arms are determined endogenously. The purpose of war is the capture of land, but the costs are that lives are lost and production sacrificed. We examine the effect of foreign aid and a tax on arms exports on war efforts.Whereas foreign aid to the warring countries is likely to increase war efforts, a tax on arms exports is likely to have just the opposite effect. The endogeneity of arms price helps to derive the optimal level of such a tax.


Protective Nature Small Open Economy Substitution Effect International Price Revenue Function 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 1.
    Anderton C.H., (1995) “Economics of Arms Trade”, In Handbook of Defense Economics, Vol. 1, K. Hartley and T. Sandler (eds.), 523–561, Amsterdam, North-HollandCrossRefGoogle Scholar
  2. 2.
    Anderson, James E. and Douglas Marcouiller (2005), “Anarchy and Autarky: Endogenous Predation as a Barrier to Trade,” International Economic Review, 46 (1), 189–213CrossRefGoogle Scholar
  3. 3.
    Anderton, Charles H., Roxane A. Anderton and John R. Carter (1999), “Economic Activity in the Shadow of Conflict,” Economic Inquiry, 37 (1), 166–79CrossRefGoogle Scholar
  4. 4.
    Becsi, Zsolt and Sajal Lahiri (2006a), “The Relationship Between Resources and Conflict: A Synthesis,” Discussion Paper No. 2006-03, Department of Economics, Southern Illinois University CarbondaleGoogle Scholar
  5. 5.
    Becsi, Zsolt and Sajal Lahiri (2006b), “Conflicts in the presence of arms trade: policy options for the international community,” presented at the Midwest International Economics Group meeting held at Purdue University during 13–15 October, 2006Google Scholar
  6. 6.
    Becsi, Zsolt and Sajal Lahiri (2007a), “Bilateral War in a Multilateral World: Carrots and Sticks for Conflict Resolution”, Canadian Journal of Economics, 40, 1168–1187CrossRefGoogle Scholar
  7. 7.
    Becsi, Zsolt and Sajal Lahiri (2007b), “Conflict in the Presence of Arms Trade: Can Foreign Aid Reduce Conflict?” pp. 3–15 in: S. Lahiri (editor), Theory and Practice of Foreign Aid, Elsevier, The NetherlandsGoogle Scholar
  8. 8.
    Brito, Dagobert L. and Michael D. Intriligator (1985), “Conflict, War, and Redistribution,” American Political Science Review, 79 (4), 943–957CrossRefGoogle Scholar
  9. 9.
    Brzoska, Michael (2001), “Taxation of the arms trade: An overview of the issues,” Paper prepared for the United Nations ad hoc Expert Group Meeting on Innovations in Mobilizing Global Resources for Development, 25–26 June 2001Google Scholar
  10. 10.
    Collier, Paul and Anke Hoeffler (2002), “Aid, Policy and Peace: Reducing the Risks of Civil Conflict,” Defense and Peace Economics, 13 (6), 435–450CrossRefGoogle Scholar
  11. 11.
    Collier Paul and Anke Hoeffler (2005), “Civil War,” Draft Chapter for the Handbook of Defense Economics, University of Oxford mimeoGoogle Scholar
  12. 12.
    Dixit, Avinash K. and Victor Norman (1980), Theory of International Trade, Cambridge University PressGoogle Scholar
  13. 13.
    Findlay, Ronald and Mohamed Amin (2000),“National Security and International Trade: A Simple General Equilibrium Model,” Columbia University, Department of EconomicsGoogle Scholar
  14. 14.
    Garfinkel, Michelle R., Stergios Skaperdas, and Constantinos Syropoulos (2004), “Globalization and Domestic Conflict,” mimeoGoogle Scholar
  15. 15.
    Gleditsch, Kristian (2004), “A Revised List of Wars Between and Within Independent States, 1816–2002,” International Interactions, 30 (3), 231–262CrossRefGoogle Scholar
  16. 16.
    Grossman, Herschel I. (1992), “Foreign Aid and Insurrection,” Defence Economics, 3(4), 275–288CrossRefGoogle Scholar
  17. 17.
    Grossman, Herschel I. and Minseong Kim (1996), “Swords or Plowshares? A Theory of the Security of Claims to Property,” Journal of Political Economy, 103 (6), 1275–1288CrossRefGoogle Scholar
  18. 18.
    Hirshleifer, Jack (1988), “The Analytics of Continuing Conflict,” Synthese, 76, 201–233CrossRefGoogle Scholar
  19. 19.
    Hirshleifer, Jack (1995), “Anarchy and its Breakdown,” Journal of Political Economy, 103 (1), 26–52CrossRefGoogle Scholar
  20. 20.
    Hufbauer, Gary C., Jeffrey J. Schott and Kimberley Ann Elliott (1990), Economic Sanctions Reconsidered: History and Current Policy, Second Edition, Washington, DC: Institute for International EconomicsGoogle Scholar
  21. 21.
    Levine, Paul and Ron Smith (1995), “The Arms Trade and Arms Control,” Economic Journal, 105 (2), 471–484CrossRefGoogle Scholar
  22. 22.
    Neary, Hugh M. (1997), “A Comparison of Rent-Seeking Models and Economic Models of Conflict,” Public Choice, 93 (3/4), 373–388CrossRefGoogle Scholar
  23. 23.
    Skaperdas, Stergios (1992), “Cooperation, Conflict, and Power in the Absence of Property Rights,” American Economic Review, 82 (4), 720–739Google Scholar
  24. 24.
    Skaperdas, Stergios and Constantinos Syropoulos (1996), “Competitive Trade with Conflict,” in Michelle R. Garfinkel and Stergios Skaperdas, ed., The Political Economy of Conflict and Appropriation, Cambridge: Cambridge University Press, 73–96CrossRefGoogle Scholar
  25. 25.
    Skaperdas, Stergios and Constantinos Syropoulos (2001), “Guns Butter, and Openness: On the Relationship Between Security and Trade,” American Economic Review, Papers and Proceedings, 91 (2), 353–357CrossRefGoogle Scholar
  26. 26.
    Skaperdas, Stergios and Constantinos Syropoulos (2002), “Insecure Property and the Efficiency of Exchange,” Economic Journal, 112 (January), 133–46CrossRefGoogle Scholar
  27. 27.
    Syropoulos, Constantinos (2004), “Trade Openness and International Conflict,” presented at the conference ‘New Dimensions in International Trade: Outsourcing, Merger, Technology Transfer, and Culture,’ held at Kobe University, Japan during December 11–12, 2004Google Scholar

Copyright information

© Springer-Verlag Italia 2010

Authors and Affiliations

  • Sajal Lahiri
    • 1
  1. 1.Department of EconomicsSouthern Illinois University CarbondaleCarbondaleUSA

Personalised recommendations