Choosing Between Peace and War

Grossman, Herschel I.

doi:10.3386/w10180

Cited by 9 publications

(8 citation statements)

References 26 publications

(17 reference statements)

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“…We follow the rationalist view of war among political scientists (Fearon, 1995; Powell, 1999, for surveys) and economists (Grossman, 2003) whose aim is to explain the puzzle that wars do occur despite their costs, even in the presence of rational leaders. The rationalist view is the most natural structure for our argument because trade gains are then taken into account in the decision to go to war 4…”

Section: The Theorymentioning

confidence: 99%

Make Trade Not War?

2008

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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. Copyright © 2008 The Review of Economic Studies Limited.

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Section: The Theorymentioning

confidence: 99%

Make Trade Not War?

2008

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“…Moreover, Fearon (1995) and Lake and Powell (1999) suggest that states often fail to agree to the most efficient outcome for both-as opposed to fighting-because they are unable to make a credible commitment to uphold a settlement. Grossman (2003) examines examples of wars to find out why some disputes are peacefully settled, whereas others are not.…”

Section: The Impact Of Trade Integration On Conflictmentioning

confidence: 99%

Does Trade Integration Contribute to Peace?

Lee¹,

Pyun

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The results also show that military conflict between countries significantly reduces not only bilateral trade interdependence but also global trade integration. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the natural and geopolitical characteristics of dyads of states that may influence the probability of military conflict and for the simultaneous determination of trade and peace. Terms of use: Documents in AbstractWe investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The results also show that military conflict between countries significantly reduces not only bilateral trade interdependence but also global trade integration. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the natural and geopolitical characteristics of dyads of states that may influence the probability of military conflict and for the simultaneous determination of trade and pe...

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“…P(c ijt = 1| g,h,p) is then the probability that i and j are at war in year t conditional on geographical characteristics g (e.g. bilateral distance, common 11 See Grossman (2003) for an example of the Rationalist approach. Powell (1999) surveys different approaches to explaining war.…”

Section: A Bilateral Conflict Equationmentioning

confidence: 99%