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Blood Diamond: International Policy Options For Conflict Resolution, Sajal Lahiri

Economics Discussion Papers

We construct a trade-theoretic model of two open economies which are in conflict with each other. War efforts - which involve the use of soldiers and military hardware - are determined endogenously. The purpose of war is the capture of land containing a natural resource like diamond, but the costs are that lives are lost and production sacrificed. The capture of mining land helps to reinforce the war by using profits from the sale of the natural resource to purchase arms. We examine the effect of a number of policy instruments available to the international community (such as foreign aid, …