Openness and internal conflict
This article examines the relationship between economic openness and internal conflict. The article first discusses different theoretical perspectives on how openness affects a country's internal stability and how internal conflict affects openness. Next, empirical estimates of the relationship between conflict and openness are presented, where conflict is measured with both a civil war dummy variable and an events dataset. The correlation between openness and conflict in the data is negative: more open countries have less internal conflict by some measures. However, internal conflict affects the level of openness, which suggests that openness should be treated as an endogenous variable. When the effect of openness on conflict is estimated using instrumental variables or full information maximum likelihood to control for endogeneity, openness does not significantly reduce internal conflict. There is robust evidence, on the other hand, that conflict within a country reduces its international trade. Together, these results suggest that the negative correlation between openness and conflict emerges because stability facilitates international trade rather than because trade flows reduce internal conflict.
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