What you trade matters | Summary (2016)

Note: This is quite an old summary. I wrote this when I was a freshman (2016), so it doesn’t read as smoothly as my current writing.

Also, one of the constraints was for the summary to be written in a single page. Hence, the horrible formatting.

Dorussen’s (2006) primary  research  question  asks,  “Do  different  types  of  trade,  varied  across industry sectors, have different pacifying effects on dyadic conflict?”

Despite extensive work done on building support for the commercial peace theory, few have tried  to  assess  trade  at  a  lower  level  of  aggregation.  Dorussen  believes  that  the  pacifying effects of trade could vary across industrial sectors, and if true, will have serious implications for previous estimations using aggregate data.

Dorussen’s argument centers on opportunity costs, that higher levels of trade make conflict costlier, thereby reducing the likelihood of conflict. He mentions two sources of opportunity costs: factor mobility (elasticity of supply and demand), and asset specificity (costs associated with readjusting to the loss of a specific trade relation). Additionally, he adds that opportunity costs are not necessarily the same for importers and exporters. Dorussen also argues that the composition of trade matters; appropriability of resources can influence the pacifying effect of trade.

Consequently,  Dorussen  proposes  3  hypothesesfirstly, that  conflict  is  less  likely  between states that trade more. Secondly, trade is more pacifying if states exchange more goods with high opportunity costs. Third, trade is less pacifying if states exchange more goods that are more easily appropriable. To test his hypothesis, he uses logistic regression to estimate his model, with the absence of dispute being the reference category.

His  unit  of  analysis  is  dyad-year,  for  ease  of  comparison  with  Russett  and  Oneal’s  (2001) results, while his temporal range is from 1970-1997, because of limits in the trade data. Not surprisingly, his spatial domain also covers all pairs of states in the international system.

The dependent variable is the existence of a militarized interstate dispute, as collected by the COW project using the Maoz correction for the pre-1992 period. Furthermore, the analysis is limited to disputes that involve the threat with or actual use of force by at least one side. This means that only MID values of 0 (no conflict), 4 (threat) and 5 (use) were considered.

To analyze the effects of the composition of trade on conflict, the main independent variable is the proportion of trade attributable to a particular industry sector relative to total dyadic trade in a given year. The main source for the data on disaggregated bilateral trade flows is the United Nations Statistical Office.

To  ensure  the  robustness  of  his  results,  Dorussen  controls  for  economic  dependence (DEPENDL, DEPENDH), openness (OPENL), level of democracy (DEMOCRACYL, DEMOCRACYH), international  organizations   (IGOs),   defense  pacts   (DEFENSE  PACT),   logged   power  ratio (POWER-RATIO), non-geographical contiguity (NONCONTIGUITY), logged distance (DISTANCE), and presence of both minor powers in dyad (MINOR-POWERS). He also controls for temporal correlation by lagging all independent variables by one year, controlling for the number of years  a  particular  dyad  has  been  without  a  militarized  dispute,  and  includes  three  cubic splines.

His results show that trade still generally reduces the likelihood of conflict, even when using partially different data and measurements. This demonstrates the robustness of his results and  lends  support  to  his  first  hypothesis.  His  findings  also  largely  agree  with  his  third hypothesis, that risks of appropriation of trade also matter; trade in nonmanufactured and food  products  is  least  pacifying  compared  to  trade  in  manufactured  goods  and  primary chemical  and  metal  products.  However,  hypothesis  two  has  little  support;  the  differences between manufactures compared to nonmanufactures and agriculture does not correspond in and obvious way with their respective opportunity costs.

References

Dorussen, H. (2006). Heterogeneous trade interests and conflict: What you trade matters. Journal of Conflict Resolution, 50(1), 87-107

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