ANARCHY AND AUTARKY: ENDOGENOUS PREDATION AS A BARRIER TO TRADE

This article presents a general equilibrium two-country Ricardian trade model with endogenous transactions costs that arise from individual utility-maximizing allocation of labor to production and piracy. In the absence of institutions for risk sharing and coordination of defense, autarky obtains over most of the parameter space. When both trade and predation are supported in equilibrium, terms of trade effects can make security immiserizing. In that case, paradoxically, predation creates trade. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.