VIES: Thierry Mayer “The Fragmentation Paradox: De-risking Trade and Global Safety”

The FIW Research Centre International Economics and its partners kindly invite you to participate in the upcoming Vienna International Economics Seminar (VIES) on the topic:

“The Fragmentation Paradox: De-risking Trade and Global Safety”

Abstract:
We develop a model embedding a diplomatic game within aquantitative model of trade. Bilateral disputes arise exogenously, and rival countries engage in negotiations (which may fail) to avoid war. All welfare-relevant geoeconomic factors, such as the realized costs of war, the concessions to prevent it, and the probability of escalation, depend on the opportunity cost of war, itself shaped by observed trade flows. We show how to estimate  these costs in a calibrated model of trade applying it the US-China relationship, both historically and under decoupling scenarios. We find that the growing US dependence on Chinese products and markets  increased  the cost of bilateral disputes. In this context, decoupling from China through increased tariffs may offer  geopolitical benefits. Yet, our analysis highlights a fundamental\textit{security dilemma}:decoupling may reduce the diplomatic concessions needed to maintain peace but can paradoxically raise the risk of escalation by weakening incentives for restraint.

Speaker:
Thierry Mayer is Professor of Economics at Sciences Po since 2009 and was Head of the Department from 2019 to 2023. He is also a scientific advisor at the Centre d’études prospectives et d’informations internationales (CEPII), and a research fellow in the International Trade / Regional Economics programme at the Centre for Economic Policy Research (CEPR).
His research is primarily focused on trade theory and empirics, economic geography, as well as on foreign direct investment determinants. His recent publications include research on market power and trade, as well as papers estimating the impact of trade policies in industries characterized with multinational production. He also published theoretical and empirical analysis of migration choices in violent contexts, as well as spatial diffusion of cultural traits. His most frequently cited research includes empirical studies on the level and causes of market fragmentation in the European Union, and works on how gravitational forces shape economic interactions.

• Date and Time: Tuesday, December 2,  17.45-19.00 p.m.
• Location: University of Vienna, Faculty of Business, Economics and Statistics, Oskar-Morgenstern-Platz 1, 1090 Vienna, lecture hall 17, 2nd floor
• Language: English

Registration:
Participants are requested to register in advance with Julia Hnidek (julia.hnidek@univie.ac.at).

The Vienna International Economics Seminar (VIES) is a joint initiative of CEU, FIW Research Centre International Economics, Universität Wien, WIFO, wiiw, and WU Vienna. It provides a forum for the presentation and discussion of cutting-edge academic research in the field of international economics.

The seminar is held at irregular intervals on Tuesdays from 17:45 to 19:15, alternating each semester between participating institutions. From October 2025 to January 2026, the seminar will be hosted by the University of Vienna.

Organizers:
Gábor Békés (CEU), Alejandro Cuñat (Vienna U.), Harald Fadinger (Vienna U.), Gabriel Felbermayr (WIFO, WU), Miklós Koren (CEU), Harald Oberhofer (WIFO, WU), Robert Stehrer (WIIW).

The seminar is currently coordinated by Harald Fadinger.

For more information and the detailed seminar schedule, please visit: https://sites.google.com/view/viennainternationaleconomicsse/