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Conflict and Trade: An Economics Approach to Political International Interactions

Solomon Polachek

Peace Economics, Peace Science, and Public Policy, 1999, vol. 5, issue 2, 1-32

Abstract: The Klein/Gronicki/Kosaka contributions dig deeply into the impact of revolutionary political change in Eastern European countries upon their economies and indirectly through trade upon Western European economies, focussing particularly on the repercussions of anticipated arms cutbacks. However, when we examine trade, a critical issue to most national and regional economies, and a phenomena that is directly and indirectly tied in a major way to a country's military expenditures (Polachek provides empirical support for this assertion), it then becomes absolutely essential to inquire in general how political conflict affects trade and vice versa. In his contribution Polachek concentrates on political conflict as affected by trade. Can one argue that the greater the trade between an actor country and a target, the smaller the amount of actor to target conflict (or the greater the amount of cooperation)? Since the greater the inelasticity of the demand for imports and the supply of exports, the greater with increased trade the respective consumer surplus and producer surplus (measures of welfare gains), can we state: the greater the inelasticity of import demand and export supply of an actor country to a target, the smaller the amount of actor to target conflict. Polachek also looks at the reverse question, though not as extensively: does political conflict affect the level of trade? The author ingeniously exploits the several sets of data developed by political scientists, each inadequate in certain ways, and several analytical techniques (each also deficient in one way or another), to obtain relatively robust findings on the first of these two critical questions.

Date: 1999
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