A Dynamic Theory of Resource Wars
Name
Acemoglu11-01.pdf
Size
383.14 KB
Format
Adobe PDF
Checksum (MD5)
450c20695b5a3a03b61a89fe5642a5f4
Author(s)
Acemoglu, Daron
Golosov, Michael
Tsyvinski, Aleh
Yared, Pierre
Date Issued
December 31, 2010
Publisher
Cambridge, MA: Department of Economics, massachusetts Institute of Technology
Series/Report no.
Working paper, Massachusetts Institute of Technology, Dept. of Economics;11-01
Abstract
We develop a dynamic theory of resource wars and study the conditions under which such wars can be prevented. The interaction between the scarcity of resources and the incentives for war in the presence of limited commitment is at the center of our theory. We show that a key parameter determining the incentives for war is the elasticity of demand. Our first result identifies a novel externality that can precipitate war: price-taking firms fail to internalize the impact of their extraction on military action. In the case of inelastic resource demand, war incentives increase over time and war may become inevitable. Our second result shows that in some situations, regulation of prices and quantities by the resource-rich country can prevent war, and when this is the case, there will also be intertemporal distortions. In particular, resource extraction will tend to be slower than that prescribed by the Hotelling rule, which is the rate of extraction in the competitive environment. Our third result is that, due to limited commitment, such regulation can also precipitate war in some circumstances in which war is avoided in the competitive environment.
Subjects
Trade
International Conflicts
War
Exhaustible Resources
Terms of Use
An error occurred on the license name.
Persistent DSpace Link
