Economics Seminar Economics (ESE) - 2023/2024

Interviene: Mathias Thoenig, University of Lausanne

Titolo: Trade policy in the shadow of conflict: A quantitative toolkit for geoeconomics

Abstract: This paper presents a quantitative toolkit for investigating the interplay between international trade and interstate war. A generic modeling framework is first constructed based on two core elements: (i) a structural gravity model of trade and (ii) a game of diplomatic negotiation that aims to deescalate geopolitical tensions and prevent armed conflicts. Methodologically, the setup extends the conventional quantitative procedures of trade policy evaluation to incorporate conflict risk. A series of empirically relevant scenarios (US decoupling from China and accession of Ukraine to the EU) is then simulated to assess the geoeconomic welfare gains of trade in a context of heightened conflict risk.