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Does Trade Integration Contribute to Peace?

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This paper investigates the effect of trade integration on military conflict. Our empirical analysis,based on a large panel data set of 290,040 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence and global trade openness significantly promotes peace. It also suggests that the effect of trade openness varies depending on the geographical proximity of countries. The peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflicts. The analysis shows, however, that an increase in global trade openness reduces the probability of 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 multilateral 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.

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  • Lee, Jong-Wha & Pyun, Ju Hyun, 2009. "Does Trade Integration Contribute to Peace?," Working Papers on Regional Economic Integration 24, Asian Development Bank.
    • Handle: RePEc:ris:adbrei:0024
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    Cited by:

    1. Bonginkosi Mamba & André C Jordaan & Matthew Clance, 2015. "Globalisation and Conflicts: A Theoretical Approach," Working Papers 201555, University of Pretoria, Department of Economics.
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    3. Walker A. Wright, 2018. "Is Commerce Good for the Soul? An Empirical Assessment," Economic Affairs, Wiley Blackwell, vol. 38(3), pages 422-433, October.
    4. Jong‐Wha Lee & Ju Hyun Pyun, 2018. "North Korea’s Economic Integration and Growth Potential," Asian Economic Journal, East Asian Economic Association, vol. 32(3), pages 301-325, September.
    5. In Huh & Ju Hyun Pyun, 2018. "Does Nuclear Uncertainty Threaten Financial Markets? The Attention Paid to North Korean Nuclear Threats and Its Impact on South Korea's Financial Markets," Asian Economic Journal, East Asian Economic Association, vol. 32(1), pages 55-82, March.
    6. Kamal, Asmma, 2016. "Beyond Normalization of Trade Ties - A Pakistan – India Free Trade Agreement (FTA): A Stochastic Frontier Gravity Model (SFGM) Approach," MPRA Paper 87743, University Library of Munich, Germany.
    7. Chauffour, Jean-Pierre & Maur, Jean-Christophe, 2010. "Beyond market access : the new normal of preferential trade agreements," Policy Research Working Paper Series 5454, The World Bank.
    8. Verdier, Thierry, 2010. "Ouverture, conflits et capacité étatique : une perspective d’économie politique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(4), pages 415-449, décembre.
    9. Yavuz Arslan & Juan Contreras & Nikhil Patel & Chang Shu, 2018. "How has globalisation affected emerging market economies?," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and deglobalisation, volume 100, pages 27-55, Bank for International Settlements.
    10. McKibbin, Warwick J. & Chanthapun, Waranya Pim, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," Working Papers on Regional Economic Integration 36, Asian Development Bank.
    11. Pavel Yakovlev & Brandon Spleen, 2022. "Make concentrated trade not war?," Review of Development Economics, Wiley Blackwell, vol. 26(2), pages 661-686, May.
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    More about this item

    Keywords

    Trade; Globalization; Military conflict; Peace;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F15 - International Economics - - Trade - - - Economic Integration
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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