Essays On International Trade And Conflict

This thesis aims to understand the economic impact of different types of conflict on international trade and explore the role of appropriative conflict and insecurity of output on technology transfers. It is divided into three chapters. The first chapter studies the economic costs of the Afghanistan and Iraq wars associated with trade disruption. It contributes to the literature in two ways. First, it estimates the impact of war on trade, while accounting for the heterogeneity across war cases and country pairs of adversaries. Second, it examines the welfare implications of trade disruption when taking into account the importance of heterogeneity. The analysis unveils the presence of sizable differences in the impact of war on trade across war cases and within-country pairs of adversaries. Moreover, for Afghanistan, the welfare implications of allowing for heterogeneity are meaningful: the welfare gain from a counterfactual involving undoing of the 2001 war increases by a factor of six compared to the scenario that does not admit heterogeneous effects. The second chapter (joint with Michelle R. Garfinkel, Constantinos Syropoulos, and Yoto V. Yotov) examines both the desirability and feasibility of technology transfers in a setting where institutions governing the security of property or income are imperfect. Based on a guns-versus-butter model involving two countries (a technology leader and a technology laggard), our analysis determines how the security of output and the initial technological distance between them matter for social welfare and each country's decision to block a transfer. Whether it is the leader or the laggard that possibly blocks the transfer depends on the nature of technology. In the case of general-purpose technology, the leader might refuse a transfer, whereas in the case of sector-specific technology the technology laggard might have such an incentive. Notably, our analysis reveals the possible emergence of a "low-technology trap,'' wherein a technology transfer to the laggard is more likely to be blocked precisely when the laggard's initial technology is sufficiently inferior to its rival. Furthermore, we explore how the security of output and the laggard's capacity to absorb state-of-the-art technology affect the range of technological distances that generate such traps for each type of technology. The final chapter (joint with Ohyun Kwon) develops a novel high-frequency measure of bilateral governmental sentiments based on the US Department of State press briefings. Our inter-governmental sentiment index (IGS) captures the tone of the bilateral relationship between the US and twenty other countries. We posit that a more negative tone may enhance trade-related uncertainties for firms that export to the US. Moreover, we show that our index correlates well with external economic and trade uncertainties measures. In line with our objective to estimate the economic impact of bilateral sentiments on trade, we find that a rise in the IGS index has a lasting negative effect on trade. As multiple channels may explain this result, we provide evidence that our index has a causal impact on bilateral trade costs. Specifically, we present evidence that an increase in IGS between the US and trading partners decreases US imports even if we account for potential omitted-variable and reverse causality issues.