A Dynamic Theory of Resource Wars
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Acemoglu_A Dynamic.pdf
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456.04 KB
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Author(s)
Acemoglu, Daron
Golosov, Mikhail
Tsyvinski, Aleh
Yared, Pierre
Date Issued
January 2012
Journal
Quarterly Journal of Economics
Publisher
Oxford University Press (OUP)
Citation
Acemoglu, D. et al. “A Dynamic Theory of Resource Wars.” The Quarterly Journal of Economics 127.1 (2012): 283–331. Web. 25 May 2012.
Version
Author's final manuscript
Abstract
We develop a dynamic theory of resource wars and study the conditions under which such wars can be prevented. Our focus is on the interaction between the scarcity of resources and the incentives for war in the presence of limited commitment. 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 slower resource extraction than the Hotelling benchmark (with inelastic demand). Our third result is that because of limited commitment and its implications for armament incentives, regulation of prices and quantities might actually precipitate war even in some circumstances where wars would not have arisen under competitive markets.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.1093/qje/qjr048
