ECONOMIC ACTIVITY IN THE SHADOW OF CONFLICT

Authors

  • Charles H. Anderton,

    Corresponding author
      1 Associate Professor, College of the Holy Cross, Worcester, Mass., Phone 1–508-793-3441 Fax 1–508-793-3708, E-mail Canderto@holycross.edu
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  • Roxane A. Anderton,

    Corresponding author
      2 Instructor, Clark University, Worcester, Mass., Phone 1–508-793-7226, Fax 1–508-793-7780 E-mail Randerton@vax.clarku.edu
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  • John R. Carter

    Corresponding author
      3 Professor, College of the Holy Cross, Worcester, Mass., Phone 1–508-793-2676 Fax 1–508-793-3708, E-mail Jcarter@holycross.edu
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    • *The research support of the College of the Holy Cross is gratefully acknowledged. We are grateful to Herschel Grossman and Jack Hirshleifer for constructive criticisms on earlier versions of this work. We also benefited from the comments of two anonymous referees and the editor. The usual disclaimer applies.


1 Associate Professor, College of the Holy Cross, Worcester, Mass., Phone 1–508-793-3441 Fax 1–508-793-3708, E-mail Canderto@holycross.edu

2 Instructor, Clark University, Worcester, Mass., Phone 1–508-793-7226, Fax 1–508-793-7780 E-mail Randerton@vax.clarku.edu

3 Professor, College of the Holy Cross, Worcester, Mass., Phone 1–508-793-2676 Fax 1–508-793-3708, E-mail Jcarter@holycross.edu

Abstract

Appropriation possibilities significantly alter economic fundamentals in a production and exchange economy. This is the primary lesson of our model, which combines Ricardian trade and the potential for predator/prey behavior. The model shows how conflict can be subdued by mutual gains from trade, but at a resource cost that modifies the exchange itself. On the other hand, it identifies conditions wherein appropriation incentives are so strong that specialized production and trade are precluded altogether. The model also reveals a new way to think about and measure the gains from trade. (JEL C72, D51, D74, F10)

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