Abstract

What theoretical and empirical validity exists, if any, for the hypothesis that international trade reduces the incidence of international conflict or similarly that it fosters peaceful international relations? This study argues that trade reduces conflict between states due to states' aversion to losing the utility gained from trade. States are better off trading than not trading at all, even if the ensuing interdependence makes them more vulnerable. States that trade gain higher utility than those that do not. The issue of breaking trade has devastating effects on states' utility. In a conflict scenario, when choosing between war or resolve, states are better off by choosing the latter option. Empirical results using a logistical random-effects model reveal that the relationship between interdependence and conflict are insignificant, opposite of many other findings in the literature. Furthermore, the results may be insignificant because of modeling weaknesses. Surprisingly, the literature fails to be a strong guide of regression models using fixed effects or random effects. The lack thereof suggests that future studies produce improved models that can more properly use random effects to test for this relationship. Perhaps this is due to the fact that the issue is predominantly studied by International Relations scholars, but not by economists. This paper serves as call to harmonize the two fields in regards to this issue as it concerns both economists and International Relations scholars alike.

Advisor

Warner, James

Department

Economics

Publication Date

2010

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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© Copyright 2010 Andrew Stuckey