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Trade does promote peace: New simultaneous estimates of the reciprocal effects of trade and conflict

Author

Listed:
  • HÃ¥vard Hegre

    (Department of Political Science, University of Oslo Center for the Study of Civil War, Peace Research Institute Oslo (PRIO))

  • John R Oneal

    (Department of Political Science, The University of Alabama, joneal@bama.ua.edu)

  • Bruce Russett

    (Department of Political Science, Yale University)

Abstract

Two studies question whether economic interdependence promotes peace, arguing that previous research has not adequately considered the endogeneity of trade. Using simultaneous equations to capture the reciprocal effects, they report that trade does not reduce conflict, though conflict reduces trade. These results are puzzling on logical grounds. Trade should make conflict less likely, ceteris paribus, if interstate violence adversely affects commerce; otherwise, national leaders are acting irrationally. In re-analyzing the authors’ data, this article shows that trade does promote peace once the gravity model is incorporated into the analysis of conflict. Both trade and conflict are influenced by nations’ sizes and the distance separating them, so these fundamental exogenous factors must be included in models of conflict as well as trade. One study errs in omitting distance when explaining militarized disputes. The other does not adequately control for the effect of size (or power). When these theoretically informed changes are made, the pacific benefit of trade again appears. In new simultaneous analyses, the article confirms that trade promotes peace and conflict contemporaneously reduces commerce, even with extensive controls for traders’ rational expectations of violence. Previous studies that address the endogeneity of trade by controlling for the years of peace — as virtually all have done since 1999 — have not overstated the benefit of interdependence. Commerce promotes peace because violence has substantial costs, whether these are paid prospectively or contemporaneously.

Suggested Citation

  • HÃ¥vard Hegre & John R Oneal & Bruce Russett, 2010. "Trade does promote peace: New simultaneous estimates of the reciprocal effects of trade and conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 47(6), pages 763-774, November.
  • Handle: RePEc:sae:joupea:v:47:y:2010:i:6:p:763-774
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Raul Caruso & Marco Di Domizio & David A. Savage, 2015. "Hic Sunt Leones! The role of national identity on aggressiveness between national football teams," DISCE - Quaderni dell'Istituto di Politica Economica ispe0076, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    2. Oloufade, Djoulassi K., 2012. "Trade Openness, Conflict Risk and Income Inequality," MPRA Paper 40702, University Library of Munich, Germany, revised Feb 2013.
    3. Han Dorussen & Hugh Ward, 2011. "Disaggregated Trade Flows and International Conflict," Chapters,in: The Handbook on the Political Economy of War, chapter 25 Edward Elgar Publishing.
    4. Raul Caruso, 2015. "Beyond deterrence and decline. Towards a general understanding of peace economics," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 128(1), pages 57-74.
    5. Qureshi, Mahvash Saeed, 2013. "Trade and thy neighbor's war," Journal of Development Economics, Elsevier, pages 178-195.
    6. Qureshi, Mahvash Saeed, 2013. "Trade and thy neighbor's war," Journal of Development Economics, Elsevier, pages 178-195.
    7. Seitz, Michael & Tarasov, Alexander & Zakharenko, Roman, 2015. "Trade costs, conflicts, and defense spending," Journal of International Economics, Elsevier, pages 305-318.
    8. Geesche M. Merkle & Rico Ihle & Yael Kachel & Ulf Liebe, 2013. "Economic cooperation despite of political conflict: Israeli traders’ perception of Israeli-Palestinian food trade," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 151, Courant Research Centre PEG.
    9. Luo, Shali & Miller, J. Isaac, 2014. "On the spatial correlation of international conflict initiation and other binary and dyadic dependent variables," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 107-118.
    10. Bakaki Zorzeta, 2016. "Fossil Fuel Rents: Who Initiates International Crises?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 22(2), pages 173-190, April.
    11. Raymond Fisman & Yasushi Hamao & Yongxiang Wang, 2014. "Nationalism and Economic Exchange: Evidence from Shocks to Sino-Japanese Relations," Review of Financial Studies, Society for Financial Studies, pages 2626-2660.
    12. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2012. "The Geography of Conflicts and Regional Trade Agreements," American Economic Journal: Macroeconomics, American Economic Association, pages 1-35.
    13. Massoud Tansa G. & Magee Christopher S., 2012. "Trade and Political, Military, and Economic Relations," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(1), pages 1-39, May.
    14. repec:eee:inecon:v:108:y:2017:i:c:p:211-225 is not listed on IDEAS
    15. Carolyn Chisadza & Manoel Bittencourt, 2016. "Globalisation and Conflict: Evidence from sub-Saharan Africa," Working Papers 634, Economic Research Southern Africa.
    16. Christos Kollias & Suzanna-Maria Paleologou, 2017. "The Globalization and Peace Nexus: Findings Using Two Composite Indices," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, pages 871-885.
    17. Asif Efrat, 2016. "Promoting trade through private law: Explaining international legal harmonization," The Review of International Organizations, Springer, pages 311-336.
    18. Moons, S.J.V. & van Bergeijk, P.A.G., 2013. "A meta-analysis of economic diplomacy and its effect on international economic flows," ISS Working Papers - General Series 50074, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    19. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2012. "The Geography of Conflicts and Regional Trade Agreements," American Economic Journal: Macroeconomics, American Economic Association, pages 1-35.

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