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Supply-Side Market Power



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Supply Side Market Power A Structural Argument for Peace through Interdependence Jaya Wen Yale University ABSTRACT In economics supply side market concentration profoundly impacts the behavior and interests of firms within a market and this dimension of economic interaction is applicable to the context of international relations More specifically supply side market power changes the way trade influences the incidence of military conflict To test this insight I define and incorporate four new market power variables into the traditional model of military conflict I find that high dyadic market power significantly decreases the likelihood that a state will initiate military conflict This result is robust to a number of statistical checks and ultimately enriches our understanding of interstate conflict Author s note Special thanks to Bruce Russett Michael Tomz John Oneal Jaroslav Tir Jessica Weeks Nathaniel Levine and the entire MIDs team at Stanford University 1 I Introduction The effect of trade on military conflict has been fiercely debated in modern conflict literature though the concept arose centuries ago with liberal philosophers like Kant 1795 In an attempt to verify and refine the ideas behind peace through interdependence contemporary scholars have tested the liberal argument empirically using data on military conflict and numerous explanatory variables Current work predominantly suggests that trade inhibits military conflict Russett and Oneal 2001 Oneal Russett and Berbaum 2003 Hegre Oneal and Russett 2010 although dissenting voices Barbieri 1996 2002 Beck 2003 Keshk Pollins and Reuveny 2004 contend that trade has an ambiguous or even inflammatory effect However these objections run contrary to a general consensus that the liberal peace exists and there are already persuasive theoretical arguments regarding the mechanisms behind the pacifying effect of trade There are two primary perspectives on the generation of peace through interdependence The first view



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