Mathias Thoenig, University of Lausanne

Paper: Trade Policy in the Shadow of War: Quantitative Tools 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 is then simulated to assess the welfare gains of trade in a context of heightened conflict risk. Finally, the framework is used to structure a survey of the existing literature on trade and war