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This paper aims to examine the role of outside peacekeepers in a bilateral conflict.

The authors build upon a trade theoretic framework by incorporating disruptions due to war, which could affect directly the return to investment, both domestic and foreign, and by introducing explicitly peacekeeping forces into the model. Two countries are engaged in a war, with the purpose of capturing capital. A third country plays a dual role: it is the source of investments in the warring countries, and it deploys soldiers on ground for peacekeeping purposes. The authors consider the cases where the levels of foreign investments are exogenous and when they are endogenously determined by free mobility conditions. In the worst case, they find that foreign investment reduces conflict. In the case of endogenous foreign investments, they examine the effect of multilateral agreements where the two warring countries reduce their number of soldiers and the third increases the number of peacekeepers.

The authors find that the reform benefits all three countries and increases the level of foreign investments. They consider the cases of exogenous and endogenous foreign direct investment (FDI). In the first case, the authors examine the effect of an exogenous increase in FDI on the war equilibrium and find that it reduces the employment of soldiers in the warring countries and increases the size of the peacekeeping force. They also find that the first-best level of peacekeeping is larger than the equilibrium level. When FDI is endogenous, starting from the initial war equilibrium, they also examine the effect of a multilateral agreement in which the size of the peacekeeping force is increased by the third country and the two warring countries agree to reduce their war efforts. The authors find that the reform makes all three countries better off and increases the level of FDI.

The paper uses a theoretical model with third-party interventions in a bilateral war. It intends to shed light on some of the missing economic implications of peacekeeping. The paper introduces explicitly peacekeeping forces into the analysis and introduces a factor that represents a disruption to return on investment in both warring countries. The third country has a dual role; it provides investments in the warring countries and deploys soldiers for peacekeeping. Peacekeeping reduces the disruption mentioned above and affects the employment of soldiers by the warring countries. The authors find that a multilateral agreement in which the two warring countries reduce their war efforts and the third party increases its peacekeeping force can increase welfare in all three countries.

About the Editor: Sajal Lahiri is the Vandeveer Professor of Economics at the Southern Illinois University – Carbondale; has worked as consultants to the FAO, IFAD, and the World Bank; has written extensively in top economics journals on issues related to development in general and to foreign aid in particular.

The purpose of this paper is to examine the effects of four policy options for the international community to help resolve conflicts involving black diamonds: foreign aid, a tax arms exports, a tax on blood diamond and a tax on diamond exports in general from the war zones.

A trade‐theoretic model of two open economies which are in conflict with each other was constructed. War efforts, which involve the use of soldiers and arms, are determined endogenously. The purpose of war is the capture of land containing a natural resource like diamond, but the costs are that lives are lost and production sacrificed. The capture of mining land helps to reinforce the war by using profits from the sale of the natural resource to purchase arms.

The paper identifies the role of the “protective” nature of arms, and of income effects of the policy instruments, on the results. For example, foreign aid is found, unambiguously, to increase war when the entire profit from the sale of blood diamond is used to buy arms. But, when the proportion of profits from blood diamond used to buy arms is chosen optimally, foreign aid increases war efforts when arms are significantly protective of soldiers' lives.

This paper helps to understand conflicts, the resolutions of which have serious social implications for the conflict‐torn areas of the world.

This paper provides the international community with an analysis of policy options for dealing with blood diamond. It shows, for example, that controlling supply of arms can be as effective as discouraging the consumption of blood diamond.

The importance of foreign aid cannot be overstated.¹ Unprecedented integration of the world economy in recent years has brought the issue of poverty back in the policy debate at the international level. Some of the recent initiatives such as the United Nation's Millennium Development Goals and the report by the Africa Commission (set up by the British Prime Minister Tony Blair) which was discussed at length at G8 meetings, recognize this fact. The analysis of foreign aid is however fraught with controversies and paradoxes. This applies to both the theoretical and the empirical literature. There are two broad strands in the literature. First, in international trade theory, researchers have examined the welfare effects of foreign aid and, in particular, if aid can be donor-enriching and recipient-immiserizing – the so-called Transfer Paradox.² The main mechanism here is via changes in the international terms of trade. The primary benefit (loss) to the recipient (donor) can be offset by a secondary loss (gain) because of deterioration (improvement) in the international terms of trade. More recently, a number of studies have examined the possibility of strictly Pareto improving foreign aid, i.e., situations where both the donor and the recipient are better off as a result of the transfer.

We construct a specific-factor trade-theoretic model for two small open economies that are in conflict with each other and where war efforts are determined endogenously. War efforts involve the use of soldiers and imported military hardware. The purpose of war is to capture disputed land or some other resource, but with war lives are lost and production is sacrificed. In this framework, we examine the effect of foreign aid on the war efforts in the warring countries. We find, inter alia, that an increase foreign aid to the warring countries may increase war efforts when arms protect lives in a significant way.

We develop a 2×2×2 model of international trade in which one of the sectors is oligopolistic. The oligopolistic sector consists of a given number of a priori identical firms belonging to one of the two countries, but some deciding to locate in the other country so as to realize higher profits. If a firm locates in the foreign country, its technological capability is assumed to go down due to the alien environment. In this framework we examine the effect of the environment on the level of foreign direct investment and on factor prices in the two countries.

We examine the effect of borrowing constraint facing new immigrants on the process of their assimilation in the new society. We shall do so in a two-period model. In period 1, immigrants invest, with some costs to them, in trying to assimilate. The probability of success in this endeavor depends on the amount invested and also on the level of the provision of a “public” good paid for by lump-sum taxation of “natives”. Those who succeed enjoy a higher level of productivity and therefore wages in period 2. The level of investment is endogenously determined. Assimilation also affects remittances by immigrants. Given this framework, we examine the effect of public support on the degree of assimilation and income repatriation. We do so under two scenarios regarding the credit market facing new immigrants. In the first, they can borrow as much as they want in period 1 at an exogenously given interest rate. In the second scenarios, there is a binding borrowing constraint. We compare the equilibrium under the two scenarios.

This chapter investigates how international trade affects pollution using annual data from 34 Asian countries for the period 1970–2019. Following the work of Antweiler, Copeland, and Taylor (2001), the authors divide the impact into three effects – scale, technique, and composition effects. The scale of economic activity drives pollution demand. The technique effect reflects increased willingness to bear the costs of abating pollution as a country gets more prosperous because of increased international trade. International trade changes the composition of output in a country and therefore the level of pollution as different goods are produced with different pollution intensities. This is called the composition effect. This chapter measures pollution using carbon dioxide emissions (metric tons per capita) obtained from the United States Energy Information Administration. This study estimates a regression model that provides estimates of the magnitudes of trade’s impact on pollution as per the aforesaid three effects. The authors find that the scale and the composition effects of pollution are positive, but the technique effect is negative, and that the net effect is negative (international trade leads to a lower level of emission) when the underlying model is linear, but it is positive (international trade leads to a higher level of emission when non-linearities are considered).