Abstract. In this chapter, we review the recent literature on conflict and appropriation. Allowing for the possibility of conflict, which amounts to recognizing the possibility that property rights are not perfectly and costlessly enforced, represents a significant departure from the traditional paradigm of economics. The research we emphasize, however, takes an economic perspective. Specifically, it applies conventional optimization techniques and game-theoretic tools to study the allocation of resources among competing activities-productive and otherwise appropriative, such as grabbing the product and wealth of others as well as defending one's own product and wealth. In contrast to other economic activities in which inputs are combined cooperatively through production functions, the inputs to appropriation are combined adversarially through technologies of conflict.A central objective of this research is to identify the effects of conflict on economic outcomes: the determinants of the distribution of output (or power) and how an individual party's share can be inversely related to its marginal productivity; when settlement in the shadow of conflict and when open conflict can be expected to occur, with longer time horizons capable of inducing conflict instead of settlement; how conflict and appropriation can reduce the appeal of trade; the determinants of alliance formation and the importance of intra-alliance commitments; how dynamic incentives for capital accumulation and innovation are distorted in the presence of conflict; and the role of governance in conflict management.JEL Classification: D30, D70, D72, D74, H56, O17.

Conflict and war are typically viewed as the outcome of misperceptions, incomplete information, or even irrationality. We show that it can be otherwise. Despite the short-run incentives to settle disputes peacefully, there can be long-term, compounding rewards to going to war when doing better relative to one's opponent today implies doing better tomorrow. Peaceful settlement involves not only sharing the pie available today but also foregoing the possibility, brought about by war, of gaining a permanent advantage over one's opponent into the future. We show how war emerges as an equilibrium outcome in a model that takes these considerations into account. War is more likely to occur, the more important is the future.

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Abstract. We examine how globalization affects trade patterns and welfare when conflict prevails domestically. We do so in a simple model of trade, in which a natural resource like oil is contested by competing groups using real resources ("guns"). That is, conflict is viewed as stemming from imperfect property-rights enforcement. When comparing autarky with free trade in such a setting, the gains from trade have to be weighed against the possibly higher resource costs of conflict. We find that importers of the contested resource gain unambiguously. By contrast, exporters of the contested resource lose under free trade, unless the world price of the resource is sufficiently high. Regardless of what price obtains in the world market, countries tend to over-export the contested resource relative to what we would observe if there were no conflict; for some range of prices, the presence of conflict even reverses the country's apparent comparative advantage. For an even wider range of prices, an increase in the international price of the contested resource reduces welfare, an instance of the "natural resource curse." JEL Classification: D30, D70, D72, D74, F2, F10.

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