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On the Conflict Mitigating Effects of Trade: The India-Pakistan Case

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  • Mamoon, Dawood
  • S. Mansoob, Murshed

Abstract

We examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan. We 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, democracy scores and population are simultaneously considered. Our empirical investigation based on time series econometrics from 1950-2005 suggests that reduced bilateral trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Globalization, or a greater openness to international trade with the rest of the world, is the most significant driver of a liberal peace, rather than a common democratic orientation suggested by the pure form of the democratic peace.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:10431
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    File URL: https://mpra.ub.uni-muenchen.de/10431/1/MPRA_paper_10431.pdf
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    References listed on IDEAS

    as
    1. Polachek, Solomon W, 1997. "Why Democracies Cooperate More and Fight Less: The Relationship between International Trade and Cooperation," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 295-309, August.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    3. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    4. Polachek, Solomon W. & Seiglie, Carlos, 2007. "Trade, Peace and Democracy: An Analysis of Dyadic Dispute," Handbook of Defense Economics, Elsevier.
    5. Syed Mansoob Murshed & Dawood Mamoon, 2010. "Not loving thy neighbour as thyself: Trade, democracy and military expenditure explanations underlying India—Pakistan rivalry," Journal of Peace Research, Peace Research Institute Oslo, vol. 47(4), pages 463-476, July.
    6. John R. Oneal & Bruce Russett, 1999. "Assessing the Liberal Peace with Alternative Specifications: Trade Still Reduces Conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(4), pages 423-442, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Inter-state conflict and trade; democracy and conflict; conflict and economic development;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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