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date: 22 October 2020

Abstract and Keywords

This article examines general equilibrium effects of conflict using a standard trade model, but with a focus on the effects of domestic conflict. Conflict introduces distortions in an economy that are typically different than other distortions examined by economists. Tax or subsidy schemes on consumption and production, trade policies, and technology policies can then be optimal responses to the presence of conflict. The article shows how the different policy instruments can reduce conflict and how they rank relative to one another in terms of welfare.

Keywords: general equilibrium, domestic conflict, economic distortions, conflict reduction

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