Trading for Peace

40 Pages Posted: 20 Sep 2017 Last revised: 1 Mar 2018

See all articles by Saumitra Jha

Saumitra Jha

Stanford Graduate School of Business

Date Written: January 14, 2018

Abstract

I examine the conditions under which trade can support peaceful coexistence and prosperity when particular social and ethnic groups are cheap targets of violence. A simple theoretical framework reveals that for a broad set of cases, while inter-group competition generates incentives for violence, the presence of non-replicable, non-expropriable inter-group complementarities become necessary to sustain peaceful coexistence over long time horizons. In addition to complementarity, two further conditions are important for deterring violence over time. When relatively mobile groups (eg immigrants) are vulnerable, a credible threat to leave can deter violence. When less mobile (indigenous) groups are vulnerable, high monitoring costs that allow them to withhold production can improve their gains from trade. I describe the implications for indigenous entrepreneurship and cultural assimilation, the development of local institutions supporting inter-ethnic trust and immigration policies and policies aimed at mitigating conflict through financial innovations. I illustrate these implications using contemporary evidence and historical cases of organizations and institutions created to engender trade and support peace drawn from Africa, Asia, Europe and Latin America.

Keywords: Trade, Peace, Conflict, Trust, Culture

JEL Classification: F10, N25, O17, Z12

Suggested Citation

Jha, Saumitra, Trading for Peace (January 14, 2018). Economic Policy, Forthcoming; Stanford University Graduate School of Business Research Paper No. 17-64. Available at SSRN: https://ssrn.com/abstract=3039759 or http://dx.doi.org/10.2139/ssrn.3039759

Saumitra Jha (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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