How Outsourcing Affects Bilateral Political Relations
published in: Indian Journal of Economics and Business, 2004, 3 (special issue), 29-42.
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.
Text: See Discussion Paper No. 1334