How Does Intra-State Violence Affect Nations’ Trade Flows? A Quantitative Assessment On South American Countries, 2003-2018

This paper examines the effect of domestic violence (measured through several indicators of violence) on countries’ bilateral trade flows. I will try to ascertain, on a country-level, if an increase in levels of violence will lead to a significant decrease in bilateral trade. The importance of this research is two-fold: on an individual level, it is important for businesses and industries within countries to safeguard peace in their territories, because if they allow violence to grow, their foreign trading partners will not be interested in making commercial arrangements with them. On a country level, this research will contribute to states’ development, because both trade and violence are determinants for countries’ growth. Using a panel dataset with observations on all South American countriesover fifteen years (2003-2018), this paper proposes a model widely used in the literature which will be modified accordingly to assess the effect that violence has on trade both through a traditional and a theoretical Gravity model. We estimate that there are several violence-related indicators which might deter bilateral trade, although these indicators vary depending on countries’ specific level of development.