How Outsourcing Affects Bilateral Political Relations

19 Pages Posted: 11 Oct 2004

See all articles by Solomon W. Polachek

Solomon W. Polachek

State University of New York at Binghamton; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: October 2004

Abstract

One issue the literature neglects is how outsourcing stimulates trade (imports, exports and foreign direct investment), thereby affecting political relations. However, at least as far back as 1750, economic philosophers such as Baron de Montesquieu in his L'Esprit des Lois, argued, "peace is the natural effect of trade." This paper first reviews this literature and then presents econometric evidence. The evidence integrates political international relations events data with economics data on bilateral trade. The resulting econometric models show that trade between nations fosters more peaceful dyadic relations.

Keywords: outsourcing, international trade, peace, conflict, cooperation

JEL Classification: F1, F2, J61, M55, O24

Suggested Citation

Polachek, Solomon W., How Outsourcing Affects Bilateral Political Relations (October 2004). Available at SSRN: https://ssrn.com/abstract=602404

Solomon W. Polachek (Contact Author)

State University of New York at Binghamton ( email )

Binghamton, NY 13902-6000
United States
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National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics ( email )

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