The Geopolitics of International Trade in Southeast Asia

20 Pages Posted: 3 Nov 2020

See all articles by Kerem Coşar

Kerem Coşar

University of Virginia; National Bureau of Economic Research (NBER)

Benjamin Thomas

University of Virginia

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

Motivated by the historically tense geopolitical situation in Southeast Asia, we simulate the potential closure of key maritime waterways in the region to predict the impact on trade and welfare. We generate initial (unobstructed) and counterfactual (rerouted) least-cost maritime paths between trading countries, and use the distances of these routes in a workhorse model of international trade to estimate welfare effects. We find heterogeneous and economically significant reductions in real GDP, and show the magnitude of welfare loss is directly correlated with military spending as a proportion of GDP, suggesting nations may be responding to economic security threats posed by such potential conflicts.

Keywords: international trade, Military Spending, quantitative trade models

JEL Classification: F14, F5

Suggested Citation

Coşar, Kerem and Thomas, Benjamin, The Geopolitics of International Trade in Southeast Asia (October 2020). CEPR Discussion Paper No. DP15414, Available at SSRN: https://ssrn.com/abstract=3723638

Kerem Coşar (Contact Author)

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Benjamin Thomas

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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