Interstate conflict and international trade

This entry provides a selective overview of the literature on the linkages between interstate conflict and international trade that takes a game-theoretic approach, based on the premise that decision makers aim to maximize their own country's welfare. The review pays particular attention to several distinct though possibly related channels through which trade openness influences countries’ incentives to arm, and in turn discusses the implications for the emergence of war (or peace) as an equilibrium outcome. This entry also discusses how restrictive trade policies may interact with national security concerns and the welfare implications of such policies.