The consequences of Not Loving thy neigbor as Thyself: Trade, democracy and military explainations behind India Pakistan rivalry

Abstract

Conflict between Pakistan and India can be best understood in a multivariate framework where variables such as economic performance, multilateral trade with the rest of the world, bilateral trade, military expenditure, democracy scores and population are simultaneously taken into account. Our empirical investigation based on time series econometrics from 1950-2005, allowing us to truly address causality, suggests that reduced bilateral trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing, albeit with lags in some cases. Moreover, there is reverse causality between bilateral trade, militarization and conflict; low levels of bilateral trade and high militarization are conflict enhancing, equally conflict also reduces bilateral trade and raises militarization. Economic growth is conflict mitigating, but the reverse is not true. Globalization, or a greater openness to trade with the rest of the world, is the most significant driver of a liberal peace, corroborating a modified form of the capitalist peace, rather than a common democratic political orientation suggested by the pure form of the Kantian liberal peace.Inter-State Conflict and Trade, Democracy and COnflict, COnflict and Economic Development