The effect of trade on military conflict is one of the most important questions in international relations. Liberals argue that trade brings peace, neo-realists and neo-Marxists reason that trade brings conflict, while classical realists contend that trade has no impact on conflict. This article investigates theoretically and empirically some of the most important issues that remain in this literature: the roles of geographical proximity, country size, the handling of the trade data, and the conceptualization of conflict. Employing a simultaneous equations model, we find that the claim that trade brings peace is not robust, but rather it is conflict that reduces trade.
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