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We extend the dynamic Heckscher–Ohlin model in Bond et al. [Economic Theory (48, 171–204, 2011)] and show that if the labor-intensive good is inferior, then there may exist multiple steady states in autarky and poverty traps can arise. Poverty traps for the world economy, in the form of Pareto-dominated steady states, are also shown to exist. We show that the opening of trade can have the effect of pulling the initially poorer country out of a poverty trap, with both countries having steady state capital stocks exceeding the autarky level. However, trade can also pull an initially richer country into a poverty trap. These possibilities are a sharp contrast with dynamic Heckscher–Ohlin models with normality in consumption, where the country with the larger (smaller) capital stock than the other will reach a steady state where the level of welfare is higher (lower) than in the autarkic steady state. [ABSTRACT FROM AUTHOR]

In this article, it is argued that horizontal intra-industry trade is associated with reduced conflict propensity within dyads. Horizontal intra-industry trade is characterized by participation in international markets for similar – in many cases, branded – commodities, resulting from economies of scale and consumer tastes for variety. Conversely, inter-industry trade in accordance with the Ricardian and Heckscher–Ohlin models, while providing valuable trade gains, in some instances provokes vulnerability to trade partners, such that its overall impact on dyadic conflict is ambiguous. Support for this expectation is found in empirical tests spanning from 1963 to 2001. Additionally, there is evidence that development is insufficient to preclude conflict when jointly developed dyads engage in no intra-industry trade. [ABSTRACT FROM PUBLISHER]