Why Democracies Cooperate More and Fight Less: The Relationship between International Trade and Cooperation

Abstract

This paper provides an economics-based interpretation to the standard finding n in the literature that democracies rarely fight each other. A general theory of conflict between two countries is presented and empirical analysis applies this theory to the question of why democracies rarely fight each other. The results show that the fundamental factor in causing bilateral cooperation is trade. Countries seek to protect wealth gained through international trade, therefore trading partners are less combative than non-trading nations. Democratic dyads trade more than non-democratic dyads, and thus exhibit less conflict and more cooperation.

JEL Classification: F1