Raul Caruso

The Impact of International Economic Sanctions on Trade: An Empirical Analysis

International economic sanctions appear to be a common and recurring feature of political interactions between states. In particular, the United States is the country which has most frequently applied negative economic sanctions after World War II. In a parallel way, several measures, imposed by a multilateral organisation like the United Nations have taken place in recent years. This paper provides, through a gravity model approach, an estimation of the impact of economic negative sanctions on international trade. First, the study reports panel gravity estimates of bilateral trade between the U.S. and 49 target countries over the period 1960-2000, inclusive. The results show that extensive and comprehensive sanctions have a large negative impact on bilateral trade, while this is not the case for limited and moderate sanctions. A second estimation focuses on the impact of unilateral U.S. sanctions on bilateral trade volume between target countries and the other G-7 countries over the same period. The results show that unilateral extensive sanctions have a large negative impact, while limited and moderate ones induce a slight positive effect on other G-7 countries bilateral trade. Thus, in the first case the hypothesis of negative ‘network effects’ is confirmed, while in the latter the sanctions- busting argument should be defended. In both estimations, however, multilateral sanctions demonstrate a large negative impact on trade flows.

The Oxford Handbook of the Economics of Peace and Conflict

Social scientists and policy makers have long been interested in the causes and consequences of peace and conflict. This handbook brings together contributions from leading scholars who take an economic perspective to study the topic. It includes thirty-three chapters and is divided into five parts: Correlates of Peace and Conflict; Consequences and Costs of Conflict; On the Mechanics of Conflict; Conflict and Peace in Economic Context; and Pathways to Peace. Taken together, they demonstrate not only how the tools of economics can be fruitfully used to advance our understanding of conflict, but how explicitly incorporating conflict into economic analysis can add substantively to our understanding of observed economic phenomena. Some chapters are largely empirical, identifying correlates of war and peace and quantifying many of the costs of conflict. Others are more theoretical, exploring a variety of mechanisms that lead to war or are more conducive to peace. Available in OSO: http://www.oxfordhandbooks.com/oso/public/content/oho_economics/9780195392777/toc.html

A Trade Institution as a Peaceful Institution? A Contribution to Integrative Theory

Recent studies emphasize the occurrence of conflict as a rational economic activity along with production and exchange. Agents are assumed to divide their efforts into fighting and productive activities, as commonly denoted by “guns” and “butter.” This article tries to go beyond this “manichean” idea, assuming Bouldings concept of “integrative system.” In particular, the article investigates whether a trade institution committed to free and fair trade could foster “peaceful” benefits for member countries. The analysis, produced in a very simplified world, counts as a founding pillar of the Contest Success Function. The results of the model suggest that in an institutionalized scenario, agents gain more both in terms of economic utility and in terms of peace than in “continuing conflict” and “obstructed trade” scenarios.

On the Nature of Peace Economics

The purpose of this paper is to contribute to the definition of “peace economics.” The core of peace economics has to be found in the distribution between productive and unproductive activities. In particular, such a distribution is shaped by the structure of the economy and the distinction between contested and uncontested activities. The positive “side” of peace economics emphasizes the study of conflict, which is interpreted as a strategic destructive interaction between rational agents. The normative “side” of peace economics is the study of economic policies intended to minimize the unproductive components within economies, thereby also reducing the risk of outbreak of actual conflicts. In this respect, peace economics can also contribute to the study of establishment of endogenous institutions, leading to a permanent peaceful development of societies.

Butter, Guns and Ice-Cream, Theory and evidence from Sub-Saharan Africa.

This paper is intended to complement the existing literature on civil wars. First, it presents a simple theoretical model of conflict that defines a two‐sector economy. In a contested sector, two agents struggle to appropriate the maximum possible fraction of a contestable output. In an uncontested sector, they hold secure property rights over the production of some goods. Agents split their resource endowment between ‘butter’, ‘guns’ and ‘ice‐cream’. Following the theoretical insights the empirical analysis focuses on the relationship between civil wars and different sectors of the economy. In particular, a panel probit specification shows that the incidence of a civil war decreases in the size of manufacturing sector.

Climate Change, Rice Crops and Violence. Evidence from Indonesia.

This article contributes to the literature on the nexus between climate change and violence by focusing on Indonesia over the period 1993–2003. Rice is the staple food in Indonesia and we investigate whether its scarcity can be blamed for fueling violence. Following insights from the natural science literature, which claims that increases in minimum temperature reduce rice yields, we maintain that increases in minimum temperature reduce food availability in many provinces, which in turn raises the emergence of actual violence. We adopt an instrumental variable approach and select the instruments taking into account the rice growing calendar. Results show that an increase of the minimum temperature during the core month of the rice growing season, that is, December, determines an increase in violence stimulated by the reduction in future rice production per capita. Results are robust across a number of different functional specifications and estimation methods. From a methodological point of view, we claim that the inconclusive results obtained in this literature may be caused by an overlook of the correct bundle crop/temperature. Studies concentrating on several countries with different crops and using variations of average temperature as a measure of climate change missed the biological mechanism behind the relationship between climate change and violence.

Youth Unemployment, Terrorism and Political Violence, Evidence from the Israeli/Palestinian Conflict

Abstract This paper analyzes the relationship between youth unemployment and Palestinian violence. First a qualitative explanation of the underlying mechanism is given. Eventually, empirical results suggest that there is a positive association between the growth rate of youth unemployment and the brutality and incidence of violence, proxied by the numbers of victims, and incidents. Results also show that: (i) there is a negative association between the added value in the agricultural sector and both measures of violence; (ii) there is a positive association between the share of employment in agriculture and violence; (iii) there is a negative association between manufacturing added value and brutality of incidents. Results also suggest that male youth unemployment rather than female unemployment helps to explain Palestinian violence.

The Basic Economics of Match-Fixing in Sport Tournaments

Match-fixing is a recurring phenomenon of sport contests. This paper presents a simple formal model in order to explain them. The intuition behind is that an asymmetry in the evaluation of the stake is the key factor leading to match-fixing or to tacit collusion. In particular, it will be demonstrated that an asymmetry in the evaluation of the stake can lead to a concession from one agent to the other and then to a match-fixing. It is also demonstrated that when the asymmetry in the evaluation is extremely large there is room for tacit collusion. Eventually the intuitions and results of the model will be applied to make a comparison between the FIFA World Cup and the UEFA Champions League tournaments.

Spesa Pubblica e Criminalità organizzata in Italia, evidenza empirica su dati Panel nel periodo 1997- 2003.

[ENGLISH]This work presents original results regarding the relationship between economic life and organised crime in Italy. This empirical study is underpinned by some theoretical insights drawn from conflict and rent-seeking theories. Then the paper presents a panel analysis including the twenty Italian regions over the period 1997-2003. The results show that : (a) a significant positive association does exist between investments in real estate sector and the index of organised crime; (b) a significant positive association does exist between public investments and the index of organised crime index; (c) a significant negative association does exist between social protection expenditures and the index of organised crime; (d) a significant negative association does exist between investments in private investments and the index of organised crime. [ITALIAN] In questo lavoro si presentano risultati nuovi inerenti al legame tra sistema economico e criminalita organizzata. Sulla base di alcuni intuizioni teoriche derivate dalle teoria economiche del rent-seeking e dei conflitti, e stata costruita un’analisi panel per le 20 regioni italiane nel periodo 1997-2003. I risultati dell’analisi empirica mostrano che: (a) esiste un’associazione positiva significativa tra gli investimenti nel settore delle costruzioni e l’indice di criminalita organizzata; (b) Esiste una associazione positiva significativa tra gli investimenti della pubblica amministrazione e l’indice di criminalita organizzata; (c) Esiste un’associazione negativa significativa tra la spesa per protezione sociale e l’indice di criminalita organizzata; (d) Esiste un’associazione negativa significativa tra gli investimenti in industria in senso stretto e l’indice di criminalita organizzata.

Determinants of Mobility of Students in Europe: empirical evidence for the period 1998-2009.

This article studies the economic determinants of intra-European student mobility. We constructed a panel of 33 European countries for the period 1998-2009. The dependent variable is the inflow of foreign students (International Standard Classification of Education [ISCED] 5-6) from European Union (EU)-27, European Economic Area (EEA), and candidate countries. Results show that (a) the expenditure per student appears to be a crucial determinant. It is reasonable to maintain that students are likely to choose countries where the students are granted with adequately funded services and perhaps monetary incentives. Eventually, other significant determinants are (a) the actual level of safety, (b) the degree of openness of host country, and (c) the GDP per capita of host country.