@article{b1a1cf573bab4522aecc7073a1763ba6,
title = "A dynamic theory of resource wars",
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.",
author = "Daron Acemoglu and Mikhail Golosov and Aleh Tsyvinski and Pierre Yared",
note = "Funding Information: ∗We thank V. V. Chari, Elhanan Helpman, Larry Jones, Antonio Merlo, Gerard Padr{\'o} i Miquel, Kristopher Ramsay, Stergios Skaperdas, Enrico Spolaore, three anonymous referees, and seminar participants at Berkeley, the Canadian Institute for Advanced Research, Kellogg MEDS, New York University, the Princeton-Yale Conference on War and Trade, NBER, and the Society for the Advancement of Economic Theory Conference for comments. We thank Nick Werquin for excellent research assistance Acemoglu gratefully acknowledges financial support fromtheNSF, theARO, andtheCanadianInstituteforAdvanced Research. Golosov and Tsyvinski gratefully acknowledge financial support from the NSF. Golosov, Tsyvinski, and Yared thank EIEF for its hospitality. 1. In his classic, A Study of War, Wright (1942) devotes a chapter to the relationship between war and resources. Another classic reference, Statistics of Deadly Quarrels by Richardson (1960), extensively discusses economic causes of war, including the control of “sources of essential commodities.” A large literature pioneered by Homer-Dixon (1991, 1999) argues that scarcity of various environmental resources is a major cause of conflict and resource wars (see Toset, Gleditsch, and Hegre 2000 , for empirical evidence). More recently, Findlay and O{\textquoteright}Rourke (2007)documentthehistoricalrelationshipbetweeninternationaltrade and military conflict.",
year = "2012",
month = feb,
day = "1",
doi = "10.1093/qje/qjr048",
language = "English (US)",
volume = "127",
pages = "283--331",
journal = "Quarterly Journal of Economics",
issn = "0033-5533",
publisher = "Oxford University Press",
number = "1",
}