Research appears to substantiate the liberal conviction that trade fosters global peace. Still, existing understanding of linkages between conflict and international economics is limited in at least two ways. First, cross-border economic relationships are far broader than just trade. Global capital markets dwarf the exchange of goods and services, and states engage in varying degrees of monetary policy coordination. Second, the manner in which economics is said to inhibit conflict behavior is implausible in light of new analytical insights about the causes of war. We discuss, and then demonstrate formally, how interdependence can influence states' recourse to military violence. The risk of disrupting economic linkages—particularly access to capital—may occasionally deter minor contests between interdependent states, but such opportunity costs will typically fail to preclude militarized disputes. Instead, interdependence offers nonmilitarized avenues for communicating resolve through costly signaling. Our quantitative results show that capital interdependence contributes to peace independent of the effects of trade, democracy, interest, and other variables.
Erik Gartzke is Assistant Professor of Political Science at Columbia University, New York, N.Y., and Postdoctoral Fellow at the Mershon Center, Ohio State University, Columbus, Ohio. Research for this article was largely completed while a faculty member at the Pennsylvania State University. He can be reached at [email protected].
Quan Li is Assistant Professor of Political Science at the Pennsylvania State University, University Park, Pennsylvania. He can be reached at [email protected].
Charles Boehmer is a Ph.D. candidate in Political Science at the Pennsylvania State University, University Park, Pennsylvania. He can be reached at [email protected].