Make Trade not War?

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State: Public
Version: Final published version
Serval ID
serval:BIB_436A8B9FDEBA
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Make Trade not War?
Journal
Review of Economic Studies
Author(s)
Martin  P., Mayer  T., Thoenig  M.
ISSN
0034-6527
Publication state
Published
Issued date
07/2008
Peer-reviewed
Oui
Volume
75
Number
3
Pages
865-900
Language
english
Abstract
This paper analyses theoretically and empirically the relationship between military conflicts and trade. We show that the conventional wisdom that trade promotes peace is only partially true even in a model where trade is economically beneficial, military conflicts reduce trade, and leaders are rational. When war can occur because of the presence of asymmetric information, the probability of escalation is lower for countries that trade more bilaterally because of the opportunity cost associated with the loss of trade gains. However, countries more open to global trade have a higher probability of war because multilateral trade openness decreases bilateral dependence to any given country and the cost of a bilateral conflict. We test our predictions on a large data set of military conflicts on the 1950-2000 period. Using different strategies to solve the endogeneity issues, including instrumental variables, we find robust evidence for the contrasting effects of bilateral and multilateral trade openness. For proximate countries, we find that trade has had a surprisingly large effect on their probability of military conflict.
Keywords
International-trade, conflict, peace, interdependence, globalization, determinants, politics, disputes
Web of science
Create date
28/08/2009 12:47
Last modification date
21/08/2019 6:09
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