Suchergebnisse

The paper presents a framework to explore the trade‐off between pro‐authority and pro‐efficiency foreign trade policy. The former is exemplified by the tributary foreign trade system in Imperial China, while the latter by the government‐supervised private foreign trade. In the Song Dynasty (960–1276), a strong external enemy compelled the monarchy to choose a pro‐efficiency trade policy to finance the army, whereas during the early Ming Dynasty (1368–1644) when China was strong a pro‐authority trade policy was favoured. During the late Ming, as the dynasty weakened, accompanied by external threats and internal mismanagement, the imperial government once again chose a pro‐efficiency trade policy.

AbstractWe develop a model of international trade between three countries, one of which hosts pirates. When the number of pirate ships increases, the probability for one of the pirate ships (for one commercial ship) encountering a commercial (pirate) ship decreases (increases). Then, the commercial ships have an incentive to spend more on defence and pirate ships to invest less on attack. If pirates operate under free entry, they do not internalize the entry externality. Then, their number rises until it reaches a level such that their attack power has become negligible and the defence of the commercial ships has reached a high level. The economy settles in a full deterrence equilibrium. However, if the number of pirate ships is controlled by an authority, which maximizes piracy's profit, the economy settles in an equilibrium where piracy is active and commercial ships spend less on defence.Piracy is a substitute for trade. Piracy depends on the terms of trade of the pirate country and on the relative efficiency of the attack versus the defence.