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On the Costs of Not Loving Thy Neighbour as Thyself

Author

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  • Murshed, S.M.
  • Mamoon, D.

Abstract

The authors examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan. They begin with theoretical models covering the opportunity costs of conflict in terms of trade losses and security spending, as well as the costs of making concessions to rivals. Conflict between the two nations can be best understood in a multivariate framework where variables such as economic performance, integration with rest of the world, bilateral trade, military expenditure, population are simultaneously taken into account. The authors' empirical investigation based on time series econometrics for the period 1950-2005 with causality tests suggests that reduced trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Moreover, there is reverse causality between bilateral trade, militarization and conflict; low levels of bilateral trade and high militarization are conflict enhancing, equally conflict also reduces bilateral trade and raises militarization. The authors also run forecasting simulations on 6 different VECM models. Globalization or a greater openness to international trade in general are more significant drivers of a liberal peace, rather than a common democratic political orientation suggested by the pure form of the democratic peace.

Suggested Citation

  • Murshed, S.M. & Mamoon, D., 2007. "On the Costs of Not Loving Thy Neighbour as Thyself," ISS Working Papers - General Series 18748, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  • Handle: RePEc:ems:euriss:18748
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Dawood Mamoon & S. Murshed, 2010. "The conflict mitigating effects of trade in the India-Pakistan case," Economics of Governance, Springer, vol. 11(2), pages 145-167, April.
    2. Dawood MAMOON, 2017. "Common dreams, different circumstances: Lessons from contemporary development economics," Journal of Economics Bibliography, KSP Journals, vol. 4(4), pages 354-356, December.
    3. Mamoon, Dawood & Aslam, Rizwan & Mughal, Hammad & Paracha, Sohail & Ain, Noor ul & Ayesha, Anam & Qudus, Maliha & Saif, Osman Bin, 2010. "Regional trade in south Asia-impediments and the way forward," MPRA Paper 27010, University Library of Munich, Germany.
    4. Dawood MAMOON, 2017. "Missing the Peace Train in 2006: Economic and political dynamics of India Pakistan hostility?," Journal of Economic and Social Thought, KSP Journals, vol. 4(3), pages 322-328, Seprember.
    5. Mamoon, Dawood & S. Mansoob, Murshed, 2008. "On the Conflict Mitigating Effects of Trade: The India-Pakistan Case," MPRA Paper 10431, University Library of Munich, Germany.

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    More about this item

    Keywords

    India; Pakistan; conflict and economic development; democracy and conflict; inter-state conflict and trade;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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