Garfinkel, Michelle R.; Skaperdas, Stergios; … - 2009
We augment the canonical neoclassical model of trade to allow for interstate disputes over land, oil, water, or other … resources. The costs of such disputes in terms of arming depend on the trade regime in place. Under either autarky or free trade …, the larger country (in terms of factor endowments) need not to be more powerful. Yet, under free trade, there is a …