Brendan Cooley International Relations | Political Economy | Violent Conflict


Trade Wars, Hot Wars, and the Commercial Peace

Abstract: What do governments want, and why do their objectives bring them into conflict with one another? Here, I marry a simple domestic political economy of trade, inspired by Grossman and Helpman (1994, 1995), with an international model of bargaining and war (Fearon 1995). I then explore how changes in economic and political primitives affect the bargaining environment when governments have both militarized and non-militarized tools to pursue their policy objectives. The model demonstrates that the magnitude of conflicts of interest and the likelihood of war between states vary dramatically as a function of whose welfare governments maximize. Those that maximize social welfare generate few externalities, yielding largely harmonious international relations, while those that maximize rents impose large externalities on their neighbors and more frequently engage in conflict. The model provides firm political-economic foundations for other studies linking government bias to patterns of international conflict (Lake 1992, Jackson and Morelli 2007).