Abstract
We examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan, beginning with a theoretical model 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 is best understood in a multivariate framework where variables such as economic performance, integration with rest of the world, bilateral trade, military expenditure, democracy orientation and population are simultaneously considered. Our empirical investigation based on time series econometrics from 1950 to 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.
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Acknowledgments
We wish to thank participants of the WZB workshop (Berlin, 28–29th March 2008), the guest editor of this issue (Stergios Skaperdas), and an anonymous referee for helpful comments.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Mamoon, D., Murshed, S.M. The conflict mitigating effects of trade in the India-Pakistan case. Econ Gov 11, 145–167 (2010). https://doi.org/10.1007/s10101-010-0074-y
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DOI: https://doi.org/10.1007/s10101-010-0074-y