Assessing the Liberal Peace with Alternative Specifications: Trade Still Reduces Conflict

Author(s): John R. Oneal and Bruce Russett

Source: Journal of Peace Research , Jul., 1999, Vol. 36, No. 4, Special Issue on Trade and
Conflict (Jul., 1999), pp. 423-442
Published by: Sage Publications, Ltd.

Stable URL: https://www.jstor.org/stable/425297

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 ? 1999 Journal of Peace Research,
vol. 36, no. 4, 1999, pp. 423-442
Sage Publications (London, Thousand
Oaks, CA and New Delhi)
,f S. : > + j /':a: "' _ ',-

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a/ eR i ( $nA .R i. [0022-3433(199907)36:4; 423-442 008899]

Assessing the Liberal Peace with Alternative

Specifications: Trade Still Reduces Conflict*

JOHN R. ONEAL
Department of Political Science, University of Alabama

BRUCE RUSSETT

Department of Political Science, Yale University

Some recent analyses challenge previous reports which show that economically importa
cantly reduces the probability of militarized disputes between countries. Beck et al. (19
effect of temporal dependence in the time-series data on empirical support for the lib
Barbieri (1998) makes a number of important changes in theoretical specification an
Using data for nearly the entire post-World War II era (1950-92), we first replicate
of the challengers. When analyzing all dyads, we find no relationship between inte
peace, but the pacific benefits of trade become evident among the politically relev
including a major power, or two contiguous states), among whom the great majority of
Subsequently, we introduce, in stages, an alternative method of controlling for tem
our theoretically preferred measures of interdependence and proximity, and new dyad
unreported trade. With these sequential modifications we find increasingly strong sup
erals' belief that economic interdependence and democracy have important pacific
support is largely robust to the methods of controlling for temporal dependence a
attempt is made to explain involvement in disputes or merely their onset. We find
asymmetric trade increases conflict.

Why Look Again at the Effect ofimportant trade has statistically signifi-
cally
Trade on Conflict? cant and substantively important benefits for
reducing interstate violence. While finding
Many research reports over the last ten years
support for the complementary liberal thesis
(Domke, 1988; Kim, 1998; Mansfield,
regarding the conflict-reducing effects of
1994; Oneal & Ray, 1997; Oneal &
joint democracy, Nathaniel Beck and his
Russett, 1997a,b, 1998; Oneal et al., 1996;
associates (Beck & Tucker, 1996; Beck et
Reuveny & Kang, 1996; Russett et al., 1998;
al., 1998) and Katherine Barbieri (1998)
Way, 1997) have indicated that economi-
have recently challenged these results
regarding
* We are gratefll for financial support from the Carnegie the effects of interdependence.
Corporation of New York, the Ford Foundation, and the
National Science Foundation, and to Soo Yeon Kim
Beck
for pro-
et al. argue that simple logistic
regression
viding us with much of our data, and to Katherine Barbieri, analysis is inappropriate for cross-
sectional and time-series data because obser-
Neal Beck, Bruno S. Frey, Gerald Schneider, and Richard
Tucker for comments. The data used in this study can be
vations are not temporally independent.
obtained from: http://www.yale.edu/unsy/democ.htm, or
by email: joneal@tenhoor.as.ua.edu. They suggest a method to correct for this

423

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424 journal of PEACE RESEARCH volume 36/ number 4 /july 1999

problem and show that, with their tech-

of conflict for the contiguous states, major-
power pairs, and all other dyads separately.
nique, the beneficial influence of economic
interdependence reported in Oneal & Our results indicate that economically
Russett (1997b) becomes statistically insig- important trade has large benefits for the
nificant. contiguous dyads, those most prone to con-
Barbieri (1998), incorporating Beck et flict. Interdependence also reduces the prob-
al.'s (1998) correction, surprisingly reports ability of militarized disputes among the
that greater interdependence significantly major-power pairs. It has no substantive
increases the risk of a militarized dispute. effect in the 'non-relevant' subset of cases.
Even among the so-called 'politically rel-
evant' dyads (Maoz & Russett, 1993) - con-
Logic of our Analyses
tiguous states and pairs containing at least
one major power - she finds that economi- Barbieri (1998) reports the results of logistic
cally important trade is positively associated regression analyses that cover an extended
with conflict, though the relationship for period of time, 1870-1992, and include
this important group of countries is not stat- alternative indicators of the importance of
istically significant. Several of Barbieri's bilateral trade. We limit our attention here
analyses are similar to those in Oneal & to 1950-92. We have reported support for
Russett (1997b), but differ in the specific the benefits of trade in the years before
definitions of the dependent and indepen- World War II elsewhere (Oneal & Russett,
dent variables, the controls included in the 1998). Our strategy is to replicate her tests,
regression equation, and the set of cases ana- using the same measurement techniques,
lyzed. It is important to ascertain whether sample of cases, and estimation techniques.
these differences in specification significantly Importantly, we explicitly take into account
affect the results. temporal dependence in the time-series data
In this article, we address the concerns of using Beck et al.'s (1998) suggested correc-
our colleagues by adopting their suggestions tion. We then make a series of modifications
for testing liberal theory, although we do not in step-wise fashion to reveal more fully the
regard all of their proposed procedures as relationship between economic interdepen-
appropriate. Nevertheless, when we adopt dence and the likelihood of militarized dis-
their methods, we find that interdependence putes. By adopting the methodology of
did significantly reduce the likelihood of those who suggest that the liberal thesis is
conflict during the years 1950-92 among debatable, we explore the robustness of our
contiguous and major-power pairs. We thenprevious findings.
undertake a series of analyses for the post- Barbieri (1998) estimates the effects of
World War II period using all pairs of statesinterdependence using two basic measures.
to determine if the pacific benefits of tradeThe first is the concentration of trade, or
are confined to this subset of cases. Assessing'partner dependence', which equals the frac-
the consequences of trade using all possible tion of a state's total exports and imports
dyads requires that special care be taken to accounted for by its trade with a dyadic
control for the influence of geographical dis-partner. She also employs a measure of econ-
tance if spurious findings are to be avoided.omic dependence, which is calculated by
We also explore the implications of other dividing a state's bilateral trade with its
key methodological decisions in assessing partner by its GDP. This measure of the
the liberal peace. Finally, we estimate the economic importance of trade, which we
effects of interdependence on the likelihood have used in all our studies, is preferable

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 John R. Oneal e& Bruce Russett ASSESSING THE LIBERAL PEACE 425

Hegre, 1997; Reed, 1998). However,

because states differ markedly in the degree
to which they are autarkic. A state's traderestricting analyses to dyads for which data
may be concentrated, but this is unlikely to
are reported in the IMF's Direction of Trade
Statistics (DOTS) (1996) also reduces the
restrain it from using force against its com-
sample of cases and can be avoided. Only
mercial partner if its dependence on trade is
limited. On the other hand, a state might
46% of the disputes occurring between 1950
have a diversified portfolio of trading part-
and 1992 involved dyads with trade reported
ners but be very open to the internationalin the DOTS. Dropping cases for which
economy, and so be restrained from threat-there are missing trade data may not be the
ening military action against any one of best solution to this problem; it is certainly
inconsistent with the desire to model con-
them or even against third parties. Analyses
using the bilateral trade-to-GDP measure
flict for the largest number of dyads possible.
are largely limited to the years after 1950Indeed it is not necessary to assume that
missing trade data are in fact unknown,
because of the general unavailability of data
on economic size for earlier years. It isbecause members of the IMF are required to
report a variety of economic statistics,
Barbieri's analyses of economic dependence,
1950-92, on which we focus our attention including their bilateral exports and imports,
in this article. to the IMF. Consequently, according to the
An important feature of Barbieri's (1995, IMF's Statistics Department (Laveda,
1996, 1998) work is that it analyzes a very 1998), missing data for IMF members indi-
large sample of dyads. We have limited our cate zero (or nearly zero) trade. Thus, in
previous investigations to contiguous pairs several analyses below, we expand the empir-
and dyads containing at least one major ical domain of our study by assuming that
when data for trade of IMF members are
power, as defined by the Correlates of War
Project. Focusing on the politically relevant
missing there was no (or negligible) bilateral
states is theoretically justified because there
commerce.
is good reason to believe that these pairs If all dyads, not just the politically rel-
engage in meaningful interstate relations evant pairs, are considered, it is especially
that could involve the threat or use of mili-important to control for the effect of dis-
tary force. Indeed they account for 83% of tance on interstate relations. Geographical
the militarized disputes in the period proximity produces opportunities to fight
1950-92. Limiting analyses to the politi- and issues to fight about (Goertz & Diehl,
cally relevant subset is also convenient 1992; Kocs, 1995; Siverson & Starr, 1991);
because it reduces the number of obser- but trade levels (Bliss & Russett, 1998;
vations from over 386,000 to 38,039, which Deardorff, 1995; Tinbergen, 1962), shared
is 10% of the total. Thus, the incidence of international organization memberships
disputes among the politically relevant dyads (Russett et al., 1998), and alliances (Bremer,
is 44 times that of the non-relevant pairs. 1992), are also positively related to prox-
Barbieri and others argue that we should imity. Including all possible pairs of states
model the factors that give rise to all inter- can spuriously indicate that trade (or
state conflicts, rather than exclude some alliances) increases the risk of conflict. The
dyads as being irrelevant. problem is compounded because the
Discussion continues concerning the rela- number of peaceful dyads with a low level of
tive merits of inclusiveness versus focusing interdependence is sharply increased. Many
attention on cases for which the theories are 'false negatives'; e.g. the absence of con-
tested are clearly relevant (Gleditsch & flict between Mali and Argentina is surely

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426 journal of PEACE RESEARCH volume 36/I number 4 /july 1999

not a result of their negligible economicsalience,

ties. symmetry, and interdependence.
SALIENCEijt equals the square root of
Consequently, the influence of distance
DEPEND.
must be carefully modeled if the danger of 1,t
X DEPENDJ, where
spurious findings is to be minimizedDEPEND,. is state i' s exports to and imports
fromof
(Gleditsch, 1995; Lemke, 1995). In most state j divided by i' s GDP and
DEPENDJt
the analyses reported below, we include a is their trade divided by
dichotomous control for contiguity js
andGDP.
a SYMMETRY t is 1 -
DEPEND.
continuous measure of the distance between -DEPEND.|; and INTER-
DEP.. equals SALIENCE.. X SYMM-
states' capitals (or major ports for the largest
countries). ETRY. lJ,t
. The construction ot these measures
These measures are not redundant, as was well motivated. It responded to concerns
they might first appear. Like Barbieriabout the effects of asymmetric economic
(1998), we identify states as contiguous if
relations on the likelihood of military conflict.
they share a land boundary or are separatedCritics of capitalism in particular have argued
by less than 150 miles of water. Morethat relations between developing countries
importantly, we both include indirectand those economically advanced are charac-
borders through dependencies. As a result, terized by dependency, not interdependence.
the USA is contiguous in our data with Patterns of unequal exchange are said to allow
twenty-one countries at one time or anotherthe larger, more independent state to exploit
in the postwar period. In addition to Mexicoits commerce with its smaller trading partner,
and Canada, the USA is contiguous with theincreasing the risk of military conflict.
Netherlands, Great Britain, France, Japan, In practice, however, Barbieris measures
and New Zealand among others during are problematic because most of the values
some years. Consequently, the correlationtaken by DEPEND, the bilateral trade-to-
GDP ratio, fall in a very narrow range. As a
between our indicator of contiguity and the
consequence, the mean value of SYM-
logarithm of the distance separating states'
METRY is 0.997. Because INTERDEP is
capitals is only -0.43. Another way to indi-
cate the difference between these two simply SALIENCE X SYMMETRY, the
correlation between SALIENCE and
measures is to note that the average distance
separating the major cities of contiguous INTERDEP is 0.99. Consequently, coeffi-
states is approximately 750 miles. cients estimated for these variables tend to
be sensitive to changes in the sample. We
To insure that the large number of non-
relevant dyads do not distort our under- consider, therefore, alternative measures of
standing of the effects of interdependence, the character of the trading relations linking
we also estimate the coefficients of an states.
expanded equation designed to reveal the Barbieri's three variables can be decon-
structed into the lower (DEPENDL) and
influence of our theoretical variables within
higher (DEPENDH) trade-to-GDP ratios,
each of three subsets of cases in our sample:
the contiguous dyads, the major-power variables used in Oneal & Russett (1997b).
pairs, and other dyads. SALIENCE.. can be expressed as the
square root of DEPENDL X DEPENDH;
We modify Barbieri's (1998) specification
SYMMETRY..
in two other ways in order to clarify the conse- is 1-(DEPENDH-DE-
quences of trade. First, we deconstruct herPENDL); and INTERDEP.. equals
SALIENCE.. X SYMMETRY,j. 6EPENDL
measures of interdependence into more basic
constituents. Barbieri (1996, 1998) has and DEPENDH have the virtues of being
less highly correlated (R = 0.48), simpler in
assessed liberal theory using three variables:

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 John R. Oneal & Bruce Russett ASSESSING THE LIBERAL PEACE 427

construction, and fewer in number. They are surprising for the statistical signifi-
no more
also easy to interpret and well grounded
cance of interdependence to decline in the
theoretically. The lower trade-to-GDP presence
ratio of the PEACEYRS variables (Beck
indicates the constraints on the use of et
force
al., 1998), than it is for a measure of infla-
experienced by the less constrained state
tion in
to be less significant in a regression that
each dyad (Oneal & Russett, 1997b).also
Theincludes a control for the money supply.
probability of a dispute should be primarily
To guard against the danger of wrongly
a function of the freedom of action ofrejecting
this a true hypothesis, we estimate the
weak link in the chain of peace (Dixon, coefficients of most of our equations using
1994); the estimated coefficient of the General Estimating Equation (GEE)
DEPEND, will be negative if the liberals are(Liang & Zeger, 1986; StataCorp, 1997) in
addition to Beck et al.'s (1998) method.
right. The likelihood of conflict falls as trade
becomes increasingly important economi- GEE is a quasi-likelihood method developed
cally for the less constrained state. If asym-
specifically for pooled time-series, cross-sec-
metric trade, or dependency, increases the
tional analyses. A great virtue is its flexibility.
GEE can be used to estimate general linear
danger of conflict, then the sign of the coef-
ficient of DEPENDH will be positive.models, including analyses of dependent
variables that are binomial or a count of
The last change we make to Barbieri's
events, as well as those with a normal distri-
(1998) specification is to use an alternative
means of correcting for temporal depen-
bution. Researchers can specify the function
linking the covariates to the response vari-
dence in several analyses. Beck et al. (1998)
propose that researchers using logistic able and the correlational structure of the
error terms within groups. We have assumed
regression remedy temporal dependence in
their time-series by creating a variable which
that our time-series exhibit an autoregressive
process of the first order (AR1). Thus, when
marks the number of years that have elapsed
using GEE, we allow for temporal depen-
from the most recent occurrence of a dispute
dence in the time-series but do so in a way
and by generating a spline function of the
that gives the variables in our theoretically
years of peace. Following their suggestion,
specified model primacy in accounting for
we created a curve with three interior knots,
which produced four variables interstate disputes. Beck et al.'s method
(PEACEYRS1 ... PEACEYRS4). This sol- introduces the PEACEYRS variables into
ution for temporal dependence is problem-the estimation process as co-equals of the
atic, however. Decisions on how to treat theoretical terms.
time dependence involve theoretical ques-
tions of model specification as well as meth-
odological ones (Bennett, 1999). Beck et
Domain of Our Analyses, Definitions
al.s treatment rests on the assumption that
of Variables, and Sources of Data
the effects of the theoretical variables and of
time are separable (Beck & Tucker, 1996). Our unit of analysis throughout is the
This is particularly unlikely in the case of dyad-year. We examine the years
trade. Trade falls with the occurrence of a 1950-92 and do not limit our study to
dispute, which is why states are thought to the politically relevant dyads as we have
avoid conflict when trade is economically done in the past. This temporal domain
important. It rises over time after a dispute includes several post-Cold War years,
has ended, as traders' confidence in the extending the generalizability of our pre-
vious results.
durability of peaceful relations increases. It is

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428 journal of PEACE RESEARCH volume 36/ number 4 / july 1999

Dependent Variables: The Onset of and ... the beginning of wars, the prolonging of
Involvement in Militarized Disputes wars, the ending of wars and the prolonging
or shortening of periods of peace all share the
To address the concerns of others (Barbieri,
same causal framework. The same explanatory
1998; Beck et al., 1998; Bremer, 1992), weframework and the same factors are vital in
focus our attention on the first year, or understanding each stage in the sequel of war
onset, of a militarized dispute. We use the
and peace.
recently revised data from the Correlates of
Moreover, an examination of 166 multi-year
War (COW) Project (Bremer, 1996). A mil-
disputes during the period of our analyses
itarized dispute is an international inter-
revealed that in slightly more than half the
action involving threats, displays, or actual
cases there was either a change in the level of
uses of military force (Gochman & Maoz,
force employed from one year to another, or
1984; Jones et al., 1996). ONSET.. is a
in the second or subsequent years of a
dichotomous variable that equals 1 when a
dispute a new dispute arose at the same level
dispute between states i and j started in year
after the conclusion of the first dispute.1
tand O otherwise; subsequent years of multi-
This is clear indication that policymakers do
year disputes are dropped from the analysis.
not relinquish control of events in times of
We consider in one set of analyses the states'
military conflict.
involvement in disputes. Consequently, the
dependent variable (DISPUTEK t), as in our
Independent Variables
previously published articles, equals 1 in any
All our independent variables are lagged one
year when a dispute was ongoing between i
year in order to ensure that they have not
and j and O it is in years of peace.
been affected by a dispute still to be
Though we concentrate on the onset of dis-
explained.
putes, we are convinced that, for several
reasons, researchers should be concerned withEconomic Interdependence To assess the
all years in which states are involved in a con- effect of interdependence on the likelihood
flict. Most importantly, all our theories beginof military conflict, we use the Direction of
with the assumption that national leaders areTrade Statistics of the IMF (1996). The IMF
rational. This implies that they frequently reports country fs exports to country j (X t
re-evaluate a decision to use force. and fs imports from j (M1 t). The economic
Unsophisticated decisionmakers may not importance of their trade is calculated by
assessing the sum of exports and imports
review past decisions, and sophisticated people
relative to their national incomes. We use
may not reconsider unimportant choices; but
GDPs (Summers & Heston, 1988, 1991;
the decision to threaten, display, or use force is
Summers et al., 1995). Thus, country i's
manifestly consequential, and all nations have
established procedures designed to select dependence on trade with j in year t- 1 is:
leaders who are thought to have exceptional
DEPEND t-1 = (X_,t-i + M Ij,) / GDP^i_
decisionmaking abilities. Consequently,
national leaders should frequently re-evaluate be consistent with Barbieri (1998), we
To
their positions: escalating, de-escalating, or calculated the bilateral trade-to-GDP ratio
using trade and GDPs converted to current
maintaining a conflict contingent on changes
in domestic politics, the availability of econ-
1 By 'change in the level of force' we mean movement
omic and military resources, and international
along the standard 0-4 COW scale of hostility. These
alignments. Smith (1998) models interstate changes do not show up in the COW data because multi-
year disputes are coded in all years at the highest level of
conflict from such an assumption. We agree hostility reached at any time during its duration. We thank
with Blainey (1988: x) that: Jacob Sullivan for research assistance on this matter.

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 John R. Oneal e6 Bruce Russett ASSESSING THE LIBERAL PEACE 429

measure of joint democracy is created using

USD using exchange rates.2 This ratio repre-
sents the economic importance of trade inthe regime scores of the two members of
national prices because the exchange rate in
each dyad. JNTDEM,j t- equals ((DEMI t
the numerator and denominator cancel. In + 10) >x (DEM 1 + 10)).3
the past, we calculated states' dependence on
Alliances We control for the influence of
trade in current international prices fol-
alliances using a variable (ALLIEDlj,t-1) that
lowing the example of the originators of the
equals 1 if states were linked by a mutual
Penn World Tables (Summers et al., 1995)
defense treaty, a neutrality pact, or an
and Maddison (1991, 1995).
entente and 0 otherwise. The source of our
To ascertain the consequences of trade for
data is Singer (1995), which were updated
interstate relations, we first use the three
using Rengger (1995).
variables developed by Barbieri (1996,
1998). Recall that SALIENCEiijtl equals Capability Ratio We include a measure of
the square root of DEPEND, ^1 X the dyadic balance of power. Recent evi-
DEPEND. -; SYMMETRY. . is dence suggests that a preponderance of
1-I DEPEND.
i,t-lj,-
-DEPEND f; and
power inhibits overt conflict (Bremer, 1992;
de Soysa etSALIENCEIJ.
INTERDEPI tl equals al., 1997; Kugler & Lemke, X
SYMMETRY.I, l. As noted earlier, 1996; Maoz & Russett, 1993). To measure
however, SALIENCE and INTERDEP are national capabilities, we used the COW
highly correlated because of the limited military capabilities index composed (in
range of DEPEND. Therefore, we also equal weights) of a country's share of the
system's total population, urban population,
conduct analyses using the lower and higher
energy consumption, iron and steel produc-
trade-to-GDP ratio for each dyad, following
Oneal & Russett (1997b). DEPENDLtl tion, military manpower, and military
equals DEPENDj t-1 if DEPENDj,t-1 is less expenditures (Singer & Small, 1995).
than or equal to DEPEND. t_. otherwise, it CAPRATIOIJ.1 is the natural logarithm of
equals DEPEND. t l. DEPLNDH iS con- the ratio of the stronger state's capability
structed in a similar fashion. index to that of the weaker member in each
dyad.
Joint Democracy We estimate the peaceful-
Contiguity and Distance We include in our
ness of democracies using the most recent
Polity III data (Jaggers & Gurr, 1995, analyses a variable that identifies contiguous
1996). We created a summary measure of dyads. CONTIG-j 1 equals 1 if two states
the political character of regimes using the are directly or indirectly contiguous via
autocracy (AUTOC) and democracy dependencies, either sharing a land boundary
(DEMOC) scales: DEMI, equals DEMOCi or separated by less than 150 miles of water.
minus AUTOCI . This is preferable to using In analyses of the politically relevant dyads,
either component alone, because many this gov-indicator distinguishes between the con-
ernments have both democratic and auto- tiguous dyads, which are particularly conflict-
cratic characteristics. DEM ranges from -10 prone, and the major-power dyads. In most
for the most autocratic regimes to + 10 at of the analyses reported below, we also
the democratic end of the spectrum. A include an explicit measure of the distance

2 The price level of GDP, which equals the Purchasing
Power Parity of GDP relative to the USD divided by the
exchange rate, was used to convert real GDPs in current
prices into the exchange-rate based measure of national
income (Summers et al., 1995).
3 Adding 10 to each of the DEMOC-AUTOC scores, as
Barbieri (1998) did, means thatJNTDEM will equal zero
if one state in a dyad has a score of -10, whatever the
regime score of the other state. We found little difference
in our results when 11 was added to avoid this result.

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430 journal of PEACE RESEARCH volume 36/ number 4 /july 1999

separating the homelands of the dyadic

eral trade. Finally, we consider the conse-
members because of the importance of con-
quences of interdependence for three subsets
trolling for distance when considering the
of cases: contiguous states, pairs of states that
non-relevant dyads. DISTANCE. t equals the
include a major power, and all other dyads.
natural logarithm of the great circle distanceFirst, following Barbieri (1998), we esti-
between !s andjs capitals (or major ports for
mate the following equation:
the USA, the USSR/Russia, and Canada). ONSET.. = P*SALIENCE t- + 2 X
SYMME1TRY>1 + 3 X INTERDEPi. I
Results
+ 4 X JNTDEM.., + 5 X CONTIG.jt_
We evaluate the effects of economically + 6 x MAJPOWij,t-l
important trade and other theoretically + 7 X ALLIED.. + 3g X CAPRATIO? .
interesting variables on the likelihood of+ 1, X PEACEYRS1.
military conflict using logistic regression
analysis of pooled cross-sectional time-series + P1*PEACEYRS2. + P13*PEACEYRS3i +
data. We begin by trying to replicate
13*PEACEYRS4j (1)
Barbieri's (1998) results using her specifica- The estimated coefficients for Equ
tion.4 We analyze the onset of militarized reported in the first column of T
disputes, using her measures of salience, find no evidence with this specificat
symmetry, and interdependence. The econ- of cases for interdependence reducin
omic importance of trade is calculated in lihood of a militarized dispute. No
terms of national prices, we make no three terms (SALIENCE, SYMME
assumption about missing values of trade, INTERDEP) is close to statistical sig
and we employ the same controls and lag but there is no evidence that trade i
structure. Finally, we correct for temporal danger of interstate conflict, as Bar
dependence using the method suggested reported. Joint democracy, on the o
by Beck et al. (1998) and correct for has important peaceful benefits (p
heteroskedasticity using Huber's robust As expected, contiguous states and
standard errors. We report conservative two-taining at least one major power are
tailed tests of statistical significance. flictual than other pairs; and a pre
Subsequently, in order to reveal their of power makes conflict less likely. A
implications for the substantive findings, weare not significandy more peaceful
modify our analyses in four steps. First, we not find - as Barbieri (1998) does -
correct for autocorrelation using the GEE. are more likely than other dyads
Second, we modify the specification of the engaged in a dispute. The PEACEY
regression equation, using the lower and ables jointly are very significant, as
higher trade-to-GDP ratios and introducing all our analyses; their coefficients are not
better controls for geographical distance. reported in this or later tables in order to save
Third, we expand the domain of our space. The pseudo-R2 is 0.32; without
PEACEYRS1 -PEACEYRS4, itis 0.23.
analyses to include pairs of states that can
reasonably be assumed to have had no bilat- In Table I, column 2, the politically rel-
evant dyads alone are considered. The equa-
4 Although we replicate Barbieri's (1998) specification, we
tion
use our own data because her dataset was not available to estimated is the same as Equation 1
us at the time of writing. Consequently, we cannot beexcept
sure that MAJPOWR has been dropped
why our results differ from hers. Our data differ from the
to avoid collinearity. For this important
version analyzed by Beck et al. (1998) because observations
in 1986-92 have been added. subset of cases, economic interdependence

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 John R. Oneal e& Bruce Russett ASSESSING THE LIBERAL PEACE 431

Table I. Models of the Onset of Militarized Interstate Disputes, 1950-92

All Dyads Politically Relevant Dyads

with IMF Trade Data with IMF Trade Data

PEACEYRS PEACEYRS
Variable Correction Correction GEE

Salience _,
10.4 33.4 28.1
30.9 24.4 25.9
SE,
0.74 0.17 0.28
Symmetryp
Symmetry,_1 -1.50 -2.41 -2.79
2.14 2.02 2.39
0.49 0.23 0.24
Interdependence,_ -15.9 -53.5 -64.9
33.9 25.2 25.8
0.64 0.03 0.01

Joint Democracy,_ -0.00396 -0.00257 -0.00204

0.00078 0.00064 0.00073
< 0.001 < 0.001 0.005
Contiguity,_ 2.58 0.940 1.74
0.22 0.206 0.25
< 0.001 < 0.001 <0.001

Major Power,_ 1.21

0.23
0.001
Allied,_ -0.148 -0.425 -0.637
0.198 0.188 0.243
0.46 0.02 0.009
Log Capability Ratiot_ -0.208 -0.258 -0.208
0.050 .049 0.061
< 0.001 < 0.001 < 0.001
Constant -1.92 1.13 -0.750
2.16 2.06 2.461
0.37 0.59 0.76
x2 1595.1 499.6 120.2
X2d.f. 12 11 7
pofX2 < 0.0001 < 0.0001 < 0.0001
Pseudo-R2 0.32 0.24
N 118,466 21,619 21,613

does significantly reduce the danger of power.a The coefficients of the other variables
dispute. INTERDEP is significant at theare similar to those in the previous analysis,
0.03 level. The benefits of trade for the pol-except that ALLIED is now significant
itically relevant dyads were masked in the (p < 0.04). The pseudo-R2 is 0.24; dropping
the PEACEYRS variables, it is 0.11.
first analysis by the sheer number of the non-
relevant pairs. As shown in Table I, there are Table I, column 3, contains the estimated
approximately five times as many of thesecoefficients for the same set of theoretical
variables, again for just the politically rel-
other pairs as there are dyads that are either
evant pairs; but these estimates were
contiguous or contain at least one major

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432 journal of/PEACE RESEARCH volume 36I number 4 /july 1999

obtained by correcting for temporal depen- + 3 X CONTIG..i + 5 x DISTANCE,J,tl

dence using the GEE (Liang & Zeger, 1986; + p, x MAJPO@RiLtl
StataCorp, 1997). Accordingly, the
PEACEYRS variables were dropped from + p X ALLIEDij, + P8 x CAPRATIO (2)
Equation 1. The results are similar to those
produced by Beck et al.'s (1998) correction.This equation is estimated with both Beck et
The evidence for the benefits of economi- al.'s (1998) correction for time dependence,
cally important trade among the politically in which case PEACEYRS1 -PEACEYRS4 is
relevant pairs is important because these added to the specification, and with the
dyads are particularly prone to conflict. We GEE.
return to this issue later when we estimate The results of estimating this second
the effects of interdependence on the likeli- specification for all dyads whose trade is
hood of conflict for the contiguous states, actually reported by the IMF using Beck et
major-power pairs, and the non-relevant al.'s correction for temporal dependence are
dyads. First, however, we reconsider two given in Table II, column 1. Those from
important issues: measuring economic inter- estimating Equation 2 with GEE, allow-
dependence and controlling for distance. ing for a first-order autoregressive (AR1)
As noted earlier, SALIENCE, SYM- process, are reported in column 2. As
METRY, and INTERDEP can all be expected, the likelihood of a dispute declines
expressed as functions of the lower as the distance separating the members of a
(DEPENDL) and higher (DEPENDH) dyad increases (p < 0.001), whichever cor-
trade-to-GDP ratio in each dyad, so, as rection
in for temporal dependence is applied;
Oneal & Russett (1997b), we use these vari- and the indicator of direct or indirect conti-
ables directly to determine the effect of trade
guity is still highly significant (p < 0.001).
on the likelihood of conflict. We also changeControlling better for distance provides
the specification of the regression equation more
to evidence for the pacific effects of both
control more fully for the influence of geog-
trade and alliances. The estimated coeffi-
raphy. The results we have reported thus far
cients for ALLIED in the first two columns
indicate that the likelihood of conflict is a indicate that allies, as expected, are less likely
function of contiguity but, as noted earlier,
to fight. As Bremer (1992) showed, allies are
this variable is somewhat misleading because
more conflictual than other pairs of states
states are 'contiguous' if they share aonly if the influence of geographical distance
common border indirectly through depen-is not taken into account. The lower trade-
dencies (Barbieri, 1998; Bremer, 1992; to-GDP ratio is significant (p < 0.03) when
Maoz & Russett, 1993; Oneal & Russett, the GEE correction for autocorrelation is
1997b). used, though not with Beck et al.'s correc-
To capture more completely the effects tion
of (p < 0.15), using a two-tailed test. The
geographical proximity, we introduce a higher dependence score is insignificant in
second control into our analyses: the loga- both estimations. The influences of joint
rithm of the great circle distance between democracy, the involvement of a major
states' capitals (or major ports for the largest
power, and a preponderance of power
countries). This yields the following equa- remain largely unchanged.
tion: The analyses performed thus far include
only dyadic trade reported to the IMF. As
ONSET.t = 1P X DEPENDL,l + 2 X noted earlier, this eliminates a large number
DEPEN - + 3 X JNTDEMij,t-1 of cases because many states do not report

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 John R. Oneal e6 Bruce Russett ASSESSING THE LIBERAL PEACE 433

Table II. Models of the Onset of Militarized Interstate Disputes, 1950-92

All Dyads Politically Relevant Dyads

with IMF Trade Data with IMF Trade Data

PEACEYRS PEACEYRS
Variable Correction GEE Correction GEE

Lower Dependence,
SEi P3 p
-25.9 -67.6 -51.9 -115.4
17.9 30.7 23.4 42.7
0.15 0.03 0.03 0.007

Higher Dependencet_, 1.40 0.71 1.52 0.810

1.69 2.43 1.96 2.72
0.41 0.77 0.44 0.77

Joint Democracyf_ -0.00363 -0.00281 -0.00322 -0.00239

0.00077 0.00087 0.00068 0.00075
< 0.001 <0.001 <0.001 < 0.001

Contiguity _ 2.14 2.80 2.46 2.92

0.22 0.26 0.21 0.23
< 0.001 < 0.001 < 0.001 < 0.001
Log Distance_l -0.399 -0.489 -0.592 -0.701
0.079 0.088 0.076 0.081
< 0.001 < 0.001 < 0.001 < 0.001

Major Power_l 1.44 1.58 1.91 1.94

0.22 0.27 .23 0.25
< 0.001 <0.001 < 0.001 < 0.001
Alliedt_ -0.430 -0.666 -0.532 -0.870
0.212 0.242 0.168 0.196
0.04 0.006 0.002 < 0.001

Log Capability Ratiof_1 -0.188 -0.168 -0.231 -0.224

0.056 0.0778 0.051 0.061
< 0.001 0.034 < 0.001 < 0.001
Constant -0.35 1 -1.85 0.517 -0.362
0.623 0.678 0.626 0.656
0.57 < 0.001 0.41 0.58
X2 1481.4 970.4 2166.8 1691.5
X2d.f. 12 8 12 8
pofX2 <0.0001 < 0.0001 < 0.0001 < 0.0001
Pseudo-R2 0.33 0.36
N 118,466 118,382 271,262 269,712

the absence of tion; This

trade. those in the
mayfourth bias
column are
thefrom results
a
and is unnecessary because
GEE estimation of the
in which adjustment is madeIMF's
reporting for an AR1 process.
requirements. With this more completewe re
Accordingly,
estimated Equationset of
2 dyads, there is statistically
assuming that significant
missing
trade data for IMF members
evidence for the pacific indicate
benefits of economi-zero (o
near zero) trade. The estimated
cally important coefficients
trade using either method of
are reported in the correcting
last for two temporal
columnsdependence. ofThe Tabl
II. The coefficients in column 3 were lower trade-to-GDP ratio is significant at the
0.03 level using Beck et al.'s approach; it is
obtained using Beck et al.'s suggested correc-

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434 journal of PEACE RESEARCH volume 36/ number 4 /july 1999

Table III. Models of the Onset of and Involvement in Militarized Interstate Disputes, All Dyads,
1950-92

Onset Involvement

PEACEYRS PEACEYRS
Variable Correction GEE Correction GEE

Lower P SE,
Dependencet_l P
-40.5 -122 -34.0 -182
22.1 53 21.8 66
0.07 0.02 0.12 0.006
MajorPower 2.84 X 27.2
Lower 23.5 1.91

Dependence_, 69.81 120.2 101.9 194.5

0.97 0.82 0.82 0.99
NotRelevant X Lower 57.5 127 60.8 167
Dependencet_ 23.1 54 26.8 82
0.01 0.02 0.007 0.04
Joint Democracy_l -0.00151 -0.000722 -0.00228 -0.00116
0.00076 0.000918 0.00074 0.00092
0.05 0.43 0.002 0.21

MajorPower X Joint -0.00313 -0.00382 -0.00326 -0.00390

Democracyt_I 0.00115 0.00142 0.00118 0.00146
0.007 0.007 0.006 0.008
NotRelevant X Joint -0.00348 -0.00292 -0.00515 -0.00384
Democracy_l 0.00140 0.00139 0.00140 0.00135
0.01 0.04 <0.001 0.004
Contiguity 0.961 1.61 0.315 1.16
0.231 0.31 0.251 0.30
< 0.001 <0.001 0.11 < 0.001

Log Distance -0.235 -0.381 -0.234 -0.437

0.068 0.091 0.070 0.096
<0.001 <0.001 < 0.001 < 0.001
MajorPower X Log -0.0906 0.0356 -0.0663 -0.0254
Distance 0.1431 0.1971 0.1355 0.207
0.53 0.86 0.63 0.90

NotRelevant X Log -0.951 -0.841 -0.697 -0.594

Distance 0.142 0.156 0.209 0.236
< 0.001 < 0.001 < 0.001 0.01
Alliedt_ -0.663 -1.02 -0.565 -1.07
0.181 0.24 0.168 0.24
< 0.001 <0.001 < 0.001 < 0.001

MajorPower X Alliedt_ 0.638 0.652 0.757 0.755

0.356 0.419 0.324 0.411
0.07 0.12 0.02 0.07
NotRelevant X Allied1 0.057 0.301 -0.234 0.00608
0.320 0.356 0.338 0.40198
0.32 0.40 0.49 0.99
Log Capability Ratio1_ -0.117 -0.105 -0.166 -0.164
0.055 0.073 0.055 0.076
0.03 0.15 0.002 0.03
-0.288
MajorPower X Capability -0.310 -0.240 -0.245
Ratiot- 1
0.089 0.122 0.079 0.116

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 John R. Oneal e& Bruce Russett ASSESSING THE LIBERAL PEACE 435

Table III. - continued

< 0.001 0.01 0.002 0.04

NotRelevant X Capability -0.185 -0.139 -0.363 -0.313
Ratio1 0.110 0.123 0.109 0.13
0.09 0.26 < 0.001 0.02
Major Power 1.85 1.71 1.62 1.64
0.979 1.36 0.99 1.52
0.06 0.21 0.10 0.28
Not Politically Relevant 4.96 4.19 3.29 2.55
1.16 1.36 1.68 1.94
<0.001 <0.001 0.05 0.19
Constant -0.0680 -0.90 1.34 0.374
0.5738 0.76 0.55 0.771
0.50 0.24 0.02 0.63
X2 1857.2 1348.9 2273.4 995.4
X2 d.f. 22 18 22 18
pofX2 <0.0001 < 0.0001 < 0.0001 < 0.0001
Pseudo-R2 .39 0.46
N 271,262 269,712 271,951 270,400

significant atplied
the 0.007
each of these indicators by all level
the vari- wit
Again the ables in dependence
higher Equation 2 except for the higherscore is
insignificant. dependence score
Thus, because, as seen
there isin Table
no evide
asymmetric trade leads
II, this variable to
has a negligible conflict.
influence on
are larger values
the onset of of DEPENDH
militarized disputes.6 Thus, we ass
added a series of
with more peaceful interactive terms, e.g.
interstate relati
this does not so much
MAJPOWR reveal
X DEPENDL and NOTREL a weakn
the liberal X DEPEND , and the
argument asindicators them-
it suggests th
are declining selves, i.e. MAJPOWR
marginal and NOTREL, to
benefits of inte
dence, which Equation
we 2 have and dropped DEPENDH.
reportedThe el
(Oneal & Russett, 1998).
exact specification can be inferredThe
from the influe
the other variables list of variables in Table III. The influence
remain of
largely un
Note that over 150,000 cases have been any variable, i.e. DEPENDL, on the likeli-
added to the analysis.5 The number of dis-hood of conflict for the contiguous dyads is
putes analyzed increased by 69%. given directly by its estimated coefficient,
Finally, we estimate an expanded model while the influence for the other two groups
is determined by adding the coefficient of
designed to reveal the influence of our theor-
etical variables within each of the three the appropriate interactive variable to this
subsets of cases in our sample: the con- term. The effect of interdependence among
tiguous dyads, the major-power pairs, and
6 Initially, we did include interactive terms involving the
other dyads. To do this, we created interac-
higher dependence ratio in the specification. All were stat-
istically insignificant except the one for the dyads that are
tive terms using an indicator variable for the
neither contiguous nor involve a major power. This can
major-power (MAJPOWR) and so-called safely be ignored for the sake of simplicity because trade
non-relevant (NOTREL) dyads. We multi- does not have a substantively important effect on the like-
lihood of conflict for this group. There was additional evi-
dence in this analysis that asymmetric trade does not
5 The analysis in Table II, column 3, includes 271,262 increase the onset of disputes among the contiguous dyads,
dyads. Complete data for all variables other than trade are because the sign of the coefficient of DEPENDH was nega-
available only for an additional 33,669 dyads. tive, though insignificant.

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436 journal of PEACE RESEARCH volume 36/ number 4 /july 1999

the major-power pairs, for example, is the second subset of conflict-prone dyads reduces
sum of the coefficient of DEPENDL plus the conflict, and the effect is not statistically dif-
coefficient of MAJPOWR X DEPENDL. ferent from that for the contiguous pairs, as we
The use of interactive terms ensures that the previously reported (Oneal & Russett,
large number of non-relevant dyads for 1997b).
whom the probability of conflict is very low, The influence of trade for other dyads,
nearly 250,000 of our 271,000 cases, does the non-relevant pairs, is different. The net
not distort our understanding of the causes effect of interdependence on the likelihood
of conflict for those dyads for which conflict of conflict for these dyads is positive in three
is comparatively common - the contiguous of the four analyses. For example, for the
and major-power pairs. onset of a dispute with Beck et al.'s correc-
The results of estimating the expanded tion (Table III, column 1), the coefficient of
equation are given in Table III. In the first DEPENDL is -40.5 and that for NOTREL
two columns, we report coefficients for X DEPENDL is 57.5. The sum of these
models predicting the onset of militarized terms (17.0) is positive, indicating that
disputes. As before, we use both Beck et al.'s interdependence increases the likelihood of a
approach (column 1) and GEE (column 2) dispute. The net effect of trade is found,
to correct for autocorrelation. In columns 3 however, by multiplying the sum of these
and 4, we use the same specification and the coefficients by the value of DEPENDL,
same corrections to predict states' involve- which for this group is very small. The mean
ment in disputes. With this dependent vari- is only 0.00023, compared with 0.0037 for
able, every year that a pair of states is the contiguous pairs; and the median is actu-
involved in a dispute, not just the first, is ally zero. Consequently, the effect of trade
coded as an instance of conflict. This is the on the likelihood of conflict among this
specification we favor on theoretical grounds subset of cases, as we will show later, is
and have used in all our previous research trivial.
(Oneal & Ray, 1997; Oneal & Russett, There are significant differences in the
1997a,b; Oneal et al., 1996) effects of joint democracy, being allied, and
The results reported in Table III indicate the capability ratio for the three subsets of
that economically important trade does reduce cases. Joint democracy has the least effect in
conflict among contiguous pairs of states, restraining violence among the contiguous
whether conflict is measured as the onset of or pairs. Its influence alone is not statistically
involvement in a militarized dispute. significant when GEE is used, but is signifi-
DEPEND , which reveals the benefits of cant for both onsets (p < 0.05) and dispute
interdependence for these most conflictual involvement (p < 0.002) using the
dyads, is statistically significant for both PEACEYRS correction. Furthermore, the
interactive terms show that joint democracy
dependent variables, at the 0.02 level for onsets
and 0.006 for dispute involvement, when tem-does significantly reduce conflict among
both the major-power pairs and the non-rel-
poral dependence is corrected using GEE. It is
evant dyads. The peace-inducing benefit of
significant for the onset of disputes with the
peace-years spline (p < 0.07) and nearly so an alliance is substantially reduced if one of
(p < 0.12) for dispute involvement. As in pre- the states is a major power, as shown by the
vious analyses, the association is stronger andsignificant positive sign of MAJPOWR X
the coefficient larger with GEE. The coeffi- ALLIED in three of the four analyses pre-
cients of MAJPOWR x DEPENDL are far sented in Table III. The capability ratio has
from statistical significance. Trade for thisless influence on conflict among the

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 John R. Oneal e Bruce Russett ASSESSING THE LIBERAL PEACE 437

Table IV. Annual Probabilities of the Onset of a Militarized Dispute, 1950-92

PEACEYRS
Correction GEE

Contiguous Dyads
1. Baseline: Lower trade-to-GDP ratio at median for group; 0.063 0.106
joint democracy, log capability ratio at means for group;
states not allied.
2. Lower trade-to-GDP ratio increased by 1 SD; 0.039 0.025
other variables at baseline values.
3. Both states made fully democratic; other variables 0.043 0.089
at baseline values.
4. States made allied; other variables at baseline values. 0.033 0.041
5. Log capability ratio increased by 1 SD; other 0.054 0.093
variables at baseline values.

Major-Power Dyads
1. Baseline: Lower trade-to-GDP ratio at median for group; 0.0061 0.0084
joint democracy, log capability ratio at means for group;
states not allied.
2. Lower trade-to-GDP ratio increased by 1 SD; 0.0051 0.0055
other variables at baseline values.
3. Both states made fully democratic; other variables 0.0018 0.0025
at baseline values.
4. States made allied; other variables at baseline values. 0.0060 0.0058
5. Log capability ratio increased by 1 SD; other 0.0029 0.0040
variables at baseline values.

Non-Relevant Dyads
1. Baseline: Lower trade-to-GDP ratio at median for group; 0.00028 0.00048
joint democracy, log capability ratio at means for group;
states not allied.
2. Lower trade-to-GDP ratio increased by 1 SD; 0.00029 0.00049
other variables at baseline values.
3. Both states made fully democratic; other variables 0.00006 0.00016
at baseline values.
4. States made allied; other variables at baseline values. 0.00015 0.00024
5. Log capability ratio increased by 1 SD; other 0.00018 0.00035
variables at baseline values.

Based on the Estimated Coefficients in Table III, columns 1 and 2.

contiguous pairs than among dyads the influence of geographical distance is

involving a major power. The major powers especially important in this subset of cases.7
enjoy very favorable balances of power vis-a-
vis the many small states with which they are 7 The sign of NOTREL is unexpectedly positive, but this
paired. Finally, the coefficient of NOTREL coefficient must be interpreted in conjunction with those
DIST ANCE is largean*d * *r s ic of the theoretical variables for this subset of cases. As
x DISTANCE iS large and Signifcant ln all shown in the next section, the non-relevant dyads indeed
the analyses, indicating that accounting for have a very low likelihood of conflict.

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438 journal of PEACE RESEARCH volume 36/ number 4 / july 1999

Substantive Effects involved in a dispute under these variou

conditions are given in Table IV. The likeli
Attention is usually focused on the statistical
hood of a dispute under the baseline co
significance of estimated coefficients; but, as
ditions is 0.063 for the contiguous dyad
McCloskey (1993) has argued, it is the sub-
using Beck et al.'s method. This decreases t
stantive significance of our results that ulti-
0.039 if the lower trade-to-GDP measure is
mately matters. Indeed it becomes
increased by a standard deviation, a reduc-
increasingly important to consider the prac-
tion in danger of 38%. The result produce
tical implications of our findings as the size
with GEE is even more dramatic; the likel
of the sample increases.8 We can make our
hood of a dispute decreases from 0.106 t
results more concrete by estimating the effect
0.025 with greater trade. The benefits o
that each of our theoretical variables has on
economic interdependence for this mo
the likelihood that a militarized dispute will
conflict-prone set of countries are greater
commence. First, we calculated a baseline
than those of joint democracy or a one stan
probability for each of the three subsets of
dard deviation increase in the capability rat
cases for comparison. We set the bilateral
with either method of correcting for tem
trade-to-GDP measure at the median for
poral dependence. They are greater than t
each subset because it is more representative.
effects of being allied in the GEE analysis
Each of the other continuous variables,
and nearly as large if Beck et al.'s correctio
including PEACEYRS 1-PEACEYRS4 whenis used.
appropriate, was made equal to the mean
For the dyads composed of at least one
value for the group, and we postulated that
major power, the baseline probability is
the pair of states was unallied. We then esti- 0.0061 with Beck et al.'s method and
mated the annual probability of the onset of
0.0084 with GEE, less than one-tenth the
a militarized dispute for this 'typical' dyad for
risk of conflict experienced by contiguous
each of three subsets of cases - contiguous,
pairs of states. For this subset of cases, eco-
major-power, or non-relevant dyads - using
nomically important trade has pacific ben-
the estimated coefficients in columns 1 and
efits. The danger of a dispute decreases by
2, Table III.9 Next, we adjusted the most
16% in column one and by 35% when GEE
theoretically interesting variables in turn by
is used. Joint democracy has much larger
adding one standard deviation to DEPENDL
benefits for this subset of cases, lowering the
or the logarithm of the capability ratio, or by
incidence of conflict by 70% in both estima-
making both members of the dyad fully
tions. An increase in the capability ratio also
democratic or allied.10
increases substantially the prospects for
The annual probabilities of a dyad being
peace. Being allied raises the prospects of
8 There is a common, but erroneous, belief that a large conflict for this group of countries if GEE is
sample virtually guarantees a statistically significant
used but has little effect with Beck et al.'s
finding. A large sample only increases the likelihood that
small substantive effects will be detected. technique.
9 A dyad can be both contiguous and a major-power pair. Interdependence does increase the prob-
In estimating the probabilities reported in Table IV, we
have assumed that the contiguous dyad does not include a
ability of a dispute for the non-contiguous,
major power and the major-power dyad is not contiguous. non-major-power dyads, as Barbieri (1998)
10 These adjustments are designed to provide comparable reported; but, as shown in the last section of
effects. A one standard deviation change in the trade-to-
GDP or capability ratios is relatively large because of the Table IV, the substantive effect is very small.
skewness of both variables. Making both states' The baseline rate is only 0.00028 when cal-
DEMOC-AUTOC score equal to +10 (and thus
culated with Beck et al.'s method and
JNTDEM 400) and making the states allies is therefore
reasonable. 0.00048 with GEE. The probability of con-

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 John R. Oneal e6 Bruce Russett ASSESSING THE LIBERAL PEACE 439

flict increaeses to 0.00029 and 0.00049 if quences of interdependence for three subsets
the lower trade-to-GDP ratio is raised by of cases separately: contiguous states, pairs of
one standard deviation, an increase of onlystates that include a major power, and all
2-3% of an already small probability of con- other dyads.
flict. The substantive benefits of trade can be The results of these additional analyses
expressed in another way. If the annual
provide abundant support for the liberal
peace. Economic interdependence and joint
probability of a dispute were increased from
0.00048 to 0.00049 for our 243,000 obser- democracy are generally associated with a
vations for the non-relevant dyads, reduction in interstate violence, whether
1950-92, there would be a net increase of measured as the onset of or involvement in a
two disputes. However, there would have militarized dispute. The evidence is
been 810 fewer disputes among the con- strongest when the largest number of cases
tiguous pairs if their rate of conflict are analyzed and when temporal dependence
decreased from 0.106 to 0.025. Joint in the dyadic time-series is taken into
democracy and the creation of an alliance
account using GEE. Estimating an expanded
have substantial benefits for the non-relevant
equation, in which the effects of the theor-
etical variables are computed for the con-
dyads, at least when assessed relative to the
baseline rate. tiguous states, major-power pairs, and the
non-relevant dyads separately using interac-
tive terms, provides the clearest indication of
Conclusion: The Liberal Peace
the promise that expanded economic
relations have for international relations.
We have reassessed the liberal peace using
Trade sharply reduces the onset of or
the specification recommended by Barbieri
involvement in militarized disputes among
(1998) which incorporates Beck et al.'s
the contiguous and major-power pairs - the
(1998) correction for temporal dependence.
dyads, as Maoz & Russett (1993) correctly
We found that interdependence significantly
reduced the likelihood of conflict, 1950-92,
perceived, with meaningful levels of conflict
among contiguous and major-power pairsto- be explained. A one standard deviation
the so-called 'politically relevant' dyads, increase
as in the trade-to-GDP ratio lowers
we have previously reported. Joint democ- the likelihood of conflict for a contiguous
dyad by 38% to 76% below the baseline rate
racy too has important pacific benefits in this
test. for this group. Trade has no substantive
We then modified our analyses in four effect on the likelihood of conflict for the
steps to clarify the influence of economically non-relevant dyads. The slight 2-4%
important trade for interstate relations. First, increase in their low annual probability of a
we used the GEE as an alternative to Beck dispute, less than five chances in 10,000, is
et al.'s correction for autocorrelation. probably spurious, because trade acts as an
indicator of at least some level of interstate
Subsequently, we changed the specification
interaction.
of the regression equation, using the lower
and higher trade-to-GDP ratios and intro- Future research is needed to clarify the
ducing better controls for geographical functional
dis- form that best expresses the link
tance. Third, we included in our analysesbetween
all interdependence and peaceful inter-
pairs of states for which missing data state relations; to consider further the proper
regarding trade could reasonably be assumed technique for estimating logistic regression
to indicate that no (or little) bilateral trade analyses with pooled time-series data; and,
occurred. Finally, we considered the conse- especially, to address the complex causal

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440 journal of PEACE RESEARCH volume 36/ number 4 / july 1999

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organizations, and conflict. For now, it National Capabilities', Journal of Conflict Res-
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Deardorff, Alan V, 1995. 'Determinants of Bilat-
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eral Trade: Does Gravity Work in a Neoclas-
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442 journal of PEACE RESEARCH volume 36/ number 4I /july 1999

1988', QuarterlyJournal ofEconomics 106(2):International Studies Quarterly, Journal

327-368. of Conflict Resolution, International Organ-
Summers, Robert; Alan Heston, Daniel A. ization, and Political Research Quarterly. He
Nuxoll & Bettina Aten, 1995. The Penn will be a Fulbright Scholar at the Norwegian
World Table (Mark 5.6a). Cambridge, MA:Nobel Institute and the International Peace
National Bureau of Economic Research. Research Institute (Oslo), January to July
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omy. New York: Twentieth Century Fund.
Way, Christopher, 1997. Manchester Revisited: A
Theoretical and Empirical Evaluation of Com- BRUCE RUSSETT, b. 1935, PhD in
mercial Liberalism. PhD dissertation, Stanford Political Science (Yale University, 1961);
University. Stanford, CA. Dean Acheson Professor of International
Relations, Yale University, and Editor,
Journal of Conflict Resolution. Current
JOHN R ONEAL, b. 1946, PhD in Political research interests: the interrelations among
Science (Stanford University, 1979); Associate political systems, economic interdependence,
Professor of Political Science, University of international organizations, and peace.
Alabama. Author of various publications in

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