Predator-prey dynamics in general equilibrium and the role of trade

We examine the implications of trade in an economy with two interrelated natural resources, focusing on the case of a simple predator-prey relationship. We derive a three-sector general equilibrium model where production functions are linked via the ecological dynamics of the natural system. Under autarky, this economy exhibits a steady-state equilibrium that overexploits the prey stock, reducing the linked predator population and overall welfare in the absence of harvesting controls. When two economies engage in trade, differences in the dynamics of the two resource systems can become the basis for comparative advantage. In this case, the predator-prey relationship leads to a source of comparative advantage in harvesting prey for a country with a lower autarky steady-state proportion of predators to prey. This feature has not been noticed in the literature and leads to a counter-intuitive implication: free trade can help conserve predator and prey stocks in the country with the higher autarkic steady-state proportion of predators to prey. To illustrate the relevance of our analytic findings, we present the stylized empirical example of the effect of Chinook salmon imports on killer whale populations. (C) 2020 Elsevier B.V. All rights reserved.