| The relationships between international conflict and the other issues, such as international trade, political institutions and international interdependence, have received increasing attention. In 1978, Solomon Polachek developed conflict-trade model which claimed that increased trade between two countries results in less conflict. The purpose of this research is to go beyond this simple relationship expressed by liberal theorists and extend the conflict-trade model. To accomplish this objective, this research maximizes a plausible actor country's social welfare function subject to a balance of payments constraint and incorporates tariffs, foreign aid, distance (contiguity), country size and market power effects. The theoretical propositions supported by proofs are as follows: (1) Tariffs increase conflict between countries. (2) Foreign aid reduces actor to target conflict due to increasing imports from the target. (3) Distance increases conflict between countries because higher transportation costs lead to a reduction in trade. (4) Trade with a large target country decreases conflict more than trade with a small target country since the cost of conflict is higher when trading with a large target country. (5) Market power decreases conflict since the country with greater monopoly/monopsony market power reaps the greater gains from trade, increasing the cost of conflict. (6) In addition, rather than concentrating solely on bilateral interactions, the models are specified in enough detail to observe the conflict from actor towards the third party. That is increasing trade with a third party will decrease (increase) conflict with a target, if the third party and target are friends (rivals). This special issue is also applied when one incorporates the tariff, foreign aid, and distance (contiguity) effects as stated above.;Most empirical evidence supports the above findings. However there are several exceptions: tariffs do not have significantly positive effect in increasing conflict; a few third party tests have insignificant results or contradict the hypotheses; no significant support is found for a relationship between monopsony power and conflict; the results for monopoly power vary depending on the measure of market power. |
