Skip to main content

Investing in the Peace: Economic Interdependence and International Conflict


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.

Hide All
Andrews David M. 1994. Capital Mobility and State Autonomy: Toward a Structural Theory of International Monetary Relations. International Studies Quarterly 38 (2):193218.
Babst Dean V. 1972. A Force for Peace. Industrial Research 14 (April):5558.
Banks Jeffrey S. 1990. Equilibrium Behavior in Crisis Bargaining Games. American Journal of Political Science 34 (3):599614.
Barbieri Katherine. 1996. Economic Interdependence: A Path to Peace or a Source of International Conflict? Journal of Peace Research 33 (1):2949.
Barbieri Katherine, and Levy Jack S.. 1999. Sleeping with the Enemy: The Impact of War on Trade. Journal of Peace Research 36 (4):463–79.
Barbieri Katherine, and Schneider Gerald. 1999. Globalization and Peace: Assessing New Directions in the Study of Trade and Conflict. Journal of Peace Research 36 (4):387404.
Beck Nathaniel, Katz Jonathan N., and Tucker Richard. 1998. Taking Time Seriously: Time-Series Cross-Section Analysis with a Binary Dependent Variable. American Journal of Political Science 42 (4):1260–88.
Benoit Kenneth. 1996. Democracies Really Are More Pacific (in General): Reexamining Regime Type and War Involvement. Journal of Conflict Resolution 40 (4):636–57.
Blainey Geoffrey. 1973. The Causes of War. New York: Free Press.
Bremer Stuart A. 1992. Dangerous Dyads: Conditions Affecting the Likelihood of Interstate War, 1816–1965. Journal of Conflict Resolution 36 (2):309–41.
Bremer Stuart A. 1993. Democracy and Militarized Interstate Conflict, 1816–1965. International Interactions 18 (3):231–49.
Bueno de Mesquita Bruce. 1981. The War Trap. New Haven, Conn.: Yale University Press.
Bueno de Mesquita Bruce. 1990. Pride of Place: The Origins of German Hegemony. World Politics 43 (1):2852.
Bueno de Mesquita Bruce, and Lalman David. 1992. War and Reason: Domestic and International Imperatives. New Haven, Conn.: Yale University Press.
Caporaso James A. 1978. Dependence, Dependency, and Power in the Global System: A Structural and Behavioral Analysis. International Organization 32 (1):1343.
Chan Steve. 1984. Mirror, Mirror on the Wall … Are the Freer Countries More Pacific? Journal of Conflict Resolution 28 (4):617–48.
Cohen Benjamin J. 1998. The Geography of Money. Ithaca, N.Y.: Cornell University Press.
Deutsch Karl W. 1978. The Analysis of International Relations. 2d ed. Englewood Cliffs, N.J.: Prentice-Hall.
Dixon William J. 1993. Democracy and the Management of International Conflict. Journal of Conflict Resolution 37 (1):4268.
Dixon William J. 1994. Democracy and the Peaceful Settlement of International Conflict. American Political Science Review 88 (1):1432.
Dorussen Han. 1999. Balance of Power Revisited: A Multi-Country Model of Trade and Conflict. Journal of Peace Research 36 (4):443–62.
Eichengreen Barry. 1996. Globalizing Capital. Princeton, N.J.: Princeton University Press.
Fearon James D. 1994. Domestic Political Audiences and the Escalation of International Disputes. American Political Science Review 88 (3):577–92.
Fearon James D. 1995. Rationalist Explanations for War. International Organization 49 (3):379414.
Frieden Jeffry. 1991. Invested Interests: The Politics of National Economic Policies in a World of Global Finance. International Organization 45 (4):425–51.
Gartzke Erik. 1998. Kant We All Just Get Along? Opportunity, Willingness, and the Origins of the Democratic Peace. American Journal of Political Science 42 (1):127.
Gartzke Erik. 1999. War Is in the Error Term. International Organization 53 (3):567–87.
Gartzke Erik. 2000. Preferences and the Democratic Peace. International Studies Quarterly 44 (2):191210.
Gartzke Erik, and Jo Dong-Joon. 2000. Tipping the Scale: Signaling and the Democratic Peace. Unpublished manuscript, Pennsylvania State University.
Gasiorowski Mark J. 1986. Economic Interdependence and International Conflict: Some Cross-National Evidence. International Studies Quarterly 30 (1):2338.
Gilpin Robert. 1987. The Political Economy of International Relations. Princeton, N.J.: Princeton University Press.
Gochman Charles S., and Maoz Zeev. 1984. Militarized Interstate Disputes, 1816–1976: Procedure, Patterns, and Insights. Journal of Conflict Resolution 28 (4):585616.
Goodman John B., and Pauly Louis W.. 1993. The Obsolescence of Capital Controls? Economic Management in an Age of Global Markets. World Politics 46 (1):5082.
Gowa Joanne, and Mansfield Edward D.. 1993. Power Politics and International Trade. American Political Science Review 87 (2):408–21.
Green Donald P., Kim Soo Yeon, and Yoon David. 2001. Dirty Pool. International Organization 55 (2):441–68.
Grilli Vittorio, and Milesi-Ferretti Gian Maria. 1995. Economic Effects and Structural Determinants of Capital Controls. IMF Staff Papers 42 (3):517–51.
Hamada Koichi. 1976. A Strategic Analysis of Monetary Interdependence. Journal of Political Economy 84 (4):677700.
Hirschman Albert O. 1977. The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph. Princeton, N.J.: Princeton University Press.
International Monetary Fund. Various years. Annual Report on Exchange Arrangements and Exchange Restrictions. Washington, D.C.: IMF.
International Monetary Fund. 1993. Direction of Trade. ICPSR 7628. Washington, D.C.: IMF. Distributed by Interuniversity Consortium for Political and Social Research, Ann Arbor, Mich.
International Monetary Fund. Various years. International Financial Statistics Yearbook. Washington, D.C.: IMF.
Jaggers Keith, and Gurr Ted Robert. 1995. Tracking Democracy's Third Wave with the Polity III Data. Journal of Peace Research 32 (4):469–82.
Jones Daniel M., Bremer Stuart A., and Singer J. David. 1996. Militarized Interstate Disputes, 1816–1992: Rationale, Coding Rules, and Empirical Patterns. Conflict Management and Peace Science 15 (2):163213.
Kant Immanuel. [1795] 1957. Perpetual Peace. Reprint, New York: The Liberal Arts Press.
Keohane Robert, and Nye Joseph S. Jr 1989. Power and Interdependence. 2d ed. Glenview, Ill.: Scott, Foresman.
Kirshner Jonathan. 1995. Currency and Coercion: The Political Economy of International Monetary Power. Princeton, N.J.: Princeton University Press.
Kroll John A. 1993. The Complexity of Interdependence. International Studies Quarterly 37 (3):321–48.
Leblang David A. 1997. Domestic and Systemic Determinants of Capital Controls in the Developed and Developing World. International Studies Quarterly 41 (3):455–74.
Mansfield Edward D., and Bronson Rachel. 1997. Alliances, Preferential Trading Arrangements, and International Trade. American Political Science Review 91 (1):94106.
Maoz Zeev. 1999. Dyadic Militarized Interstate Disputes (DYMID 1.0) Data Set. Available at <>.
Maoz Zeev, and Russett Bruce. 1993. Normative and Structural Causes of Democratic Peace, 1946–1986. American Political Science Review 87 (3):624–38.
McMillan Susan M. 1997. Interdependence and Conflict. Mershon International Studies Review 41 (1):3358.
Montesquieu Baron de. [1748] 1989. Spirit of the Laws. Reprint, Cambridge: Cambridge University Press.
Morgan T. Clifton, and Campbell Sally Howard. 1991. Domestic Structure, Decisional Constraints, and War: So Why Kant Democracies Fight? Journal of Conflict Resolution 35 (2): 187211.
Morrow James D. 1999. How Could Trade Affect Conflict? Journal of Peace Research 36 (4):481–89.
Morse Edward L. 1976. Modernization and the Transformation of International Relations. New York: Free Press.
Oneal John R., and Russett Bruce M.. 1997. The Classical Liberals Were Right: Democracy, Interdependence, and Conflict, 1950–1985. International Studies Quarterly 41 (2):267–93.
Oneal John R., and Russett Bruce M. 1999a. Assessing the Liberal Peace with Alternative Specifications: Trade Still Reduces Conflict. Journal of Peace Research 36 (4):423–42.
Oneal John R., and Russett Bruce M. 1999b. Is the Liberal Peace Just an Artifact of Cold War Interests? Assessing Recent Critiques. International Interactions 25 (3):213–41.
Oneal John R., Oneal Frances H., Maoz Zeev, and Russett Bruce. 1996. The Liberal Peace: Interdependence, Democracy, and International Conflict, 1950–1985. Journal of Peace Research 33 (1):1128.
Papayoanou Paul A. 1999. Power Ties: Economic Interdependence, Balancing, and War. Ann Arbor: University of Michigan Press.
Polachek Solomon W. 1980. Conflict and Trade. Journal of Conflict Resolution 24 (1):5578.
Polachek Solomon W., Robst John, and Chang Yuan-Ching. 1999. Liberalism and Interdependence: Extending the Trade-Conflict Model. Journal of Peace Research 36 (4):405–22.
Pollins Brian M. 1989. Does Trade Still Follow the Flag? American Political Science Review 83 (2):465–80.
Ray James Lee. 1997. On the Level(s): Does Democracy Correlate with Peace? Unpublished manuscript, Vanderbilt University.
Rosenau James M. 1984. A Pre-Theory Revisited: World Politics in an Era of Cascading Interdependence. International Studies Quarterly 28 (3):245305.
Rousseau David L., Gelpi Christopher, Reiter Dan, and Huth Paul K.. 1996. Assessing the Dyadic Nature of the Democratic Peace, 1918–88. American Political Science Review 90 (3):512–33.
Rummel Rudolph J. 1997. Power Kills: Democracy as a Method of Nonviolence. New Brunswick, N.J.: Transaction Publishers.
Russett Bruce. 1993. Grasping the Democratic Peace: Principles for a Post–Cold War World. Princeton, N.J.: Princeton University Press.
Russett Bruce, Oneal John R., and Davis David R.. 1998. The Third Leg of the Kantian Tripod for Peace: International Organizations and Militarized Disputes, 1950–1985. International Organization 52 (3):441–67.
Sartori Anne. 1996. The Use of Effective Cheap-Talk Signals in International Disputes. Unpublished manuscript, University of Michigan.
Schelling Thomas C. 1960. The Strategy of Conflict. Cambridge, Mass.: Harvard University Press.
Schelling Thomas C. 1966. Arms and Influence. New Haven, Conn.: Yale University Press.
Schultz Kenneth A. 1998. Domestic Opposition and Signaling in International Crises. American Political Science Review 92 (4):829–44.
Schultz Kenneth A. 1999. Do Domestic Institutions Constrain or Inform? Contrasting Two Institutional Perspectives on Democracy and War. International Organization 53 (2):233–66.
Simmons Beth A. 1994. Who Adjusts? Domestic Sources of Foreign Economic Policy During the Interwar Years. Princeton, N.J.: Princeton University Press.
Singer J. David, Bremer Stuart, and Stuckey John. 1972. Capability Distribution, Uncertainty, and Major Power War, 1820–1965. In Peace, War, and Numbers, edited by Russett Bruce M., 1948. Beverly Hills, Calif.: Sage.
Smith Alastair. 1998. International Crises and Domestic Politics. American Political Science Review 92 (3):623–38.
Solingen Etel. 1998. Regional Orders at Century's Dawn: Global and Domestic Influences on Grand Strategy. Princeton, N.J.: Princeton University Press.
Summers Robert, and Heston Alan. 1991. The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988. Quarterly Journal of Economics 106 (2):327–69.
Suzuki Motoshi. 1994. Economic Interdependence, Relative Gains, and International Cooperation: The Case of Monetary Policy Coordination. International Studies Quarterly 38 (3):475–98.
Tetreault Mary Ann. 1980. Measuring Interdependence. International Organization 34 (3):429–43.
Wagner R. Harrison. 2000. Bargaining and War. American Journal of Political Science 44 (3):469–84.
Weede Erich. 1984. Democracy and War Involvement. Journal of Conflict Resolution 28 (4):649–64.
World Bank. 1998. The 1998 World Development Indicators CD-ROM. Washington, D.C.: World Bank.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 587 *
Loading metrics...

Abstract views

Total abstract views: 2040 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 20th January 2018. This data will be updated every 24 hours.