Trade Concentration and Interstate Conflict

Abstract

Existing studies of the trade-conflict relationship focus primarily on dyadic trade and its implications for the opportunity cost of conflict. Most states maintain economic relations with numerous partners, yet few studies have examined the effects of extradyadic trade on dyadic conflict. In an influential discussion of economic interdependence, Albert Hirschman ([1945] 1980) draws attention to the importance of both direct trade ties and the extent to which a state’s total trade is monopolized by any one trading partner. Building on this notion, we present and test a theoretical argument about the conflict-reducing implications of third-party trade. The findings provide support for our prediction that greater concentration of trade outside the dyad is associated with a reduced risk of interstate hostility and violent disputes.