Abstract We establish a theoretical and empirical framework to assess the role of resource endowments and their geographic location in interstate conflict. The main predictions of the theory are that conflict is more likely when at least one country has natural resources, when the resources in the resource-endowed country are closer to the border, and, in the case where both countries have natural resources, when the resources are located asymmetrically vis-à-vis the border. We test these predictions on a novel data set featuring oilfield distances from bilateral borders. The empirical analysis shows that the presence and location of oil are significant and quantitatively important predictors of interstate conflicts after World War II.

A widely held view is that openness to international trade leads to higher GDP volatility, as trade increases specialization and hence exposure to sector-specific shocks. We revisit the common wisdom and argue that when country-wide shocks are important, openness to international trade can lower GDP volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and provide a new answer to the question of whether and how international trade affects economic volatility.