Does Trade Integration Contribute to Peace?

31 Pages Posted: 1 Oct 2013

See all articles by Jong-Wha Lee

Jong-Wha Lee

Korea University

Ju Hyun Pyun

Korea University Business School (KUBS)

Date Written: September 29, 2013


We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country-pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace-promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The main finding of the peace-promotion effect of bilateral and global trade integration holds robust when controlling for the simultaneous determination of trade and peace.

Keywords: Trade, Globalization, Military conflict, Peace, War

JEL Classification: D74, F15, F51

Suggested Citation

Lee, Jong-Wha and Pyun, Ju Hyun, Does Trade Integration Contribute to Peace? (September 29, 2013). Available at SSRN: or

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Ju Hyun Pyun (Contact Author)

Korea University Business School (KUBS) ( email )

145 Anam-Ro, Seongbuk-Gu
Seoul, 02841
Korea, Republic of (South Korea)
82-2-3290-2610 (Phone)


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