On the Costs of Not Loving Thy Neighbour as Thyself

Syed Murshed and Dawood Mamoon

ISS Working Papers - General Series from International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague

Abstract: The authors examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan. They 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, population are simultaneously taken into account. The authors' empirical investigation based on time series econometrics for the period 1950-2005 with causality tests suggests that reduced trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Moreover, there is reverse causality between bilateral trade, militarization and conflict; low levels of bilateral trade and high militarization are conflict enhancing, equally conflict also reduces bilateral trade and raises militarization. The authors also run forecasting simulations on 6 different VECM models. Globalization or a greater openness to international trade in general are more significant drivers of a liberal peace, rather than a common democratic political orientation suggested by the pure form of the democratic peace.

Keywords: India; Pakistan; conflict and economic development; democracy and conflict; inter-state conflict and trade (search for similar items in EconPapers)
JEL-codes: D74 F13 F15 (search for similar items in EconPapers)
Date: 2007-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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