This article examines the role of economic factors in facilitating the transition to peace between former enemies. It examines a less developed angle of the commercial liberalism approach, namely, when and how economic incentives can play a positive role in the process of building peace, rather than the standard focus on how economic interaction can reduce the likelihood of armed conflicts. It does so by distinguishing between two stages in the transition to peace: Stage I of a peace treaty (cold peace) and Stage II (normalization and movement toward warm peace), and by examining the role of economic factors in each of them. The article examines the impact of three factors: (1) the domestic balance of winners and losers from the process; (2) the economic power disparities between the two parties; and (3) the role of third-party (economic) involvement. There are different dynamics in the two stages in the transition to peace, and understanding them also has important practical implications for decisionmakers who want to promote peace. These arguments are examined in a qualitative comparative analysis of the transitions to peace between Egypt and Israel, Jordan and Israel, and Japan and the Philippines and Indonesia. The qualitative method provides a better understanding of the various causal mechanisms linking economic considerations, political considerations, and transition from conflict to peace.
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