Economic interdependence and international interactions: the impact of country size on political conflict and cooperation

The trade–conflict model claims that one state, designated as the ‘actor’, is deterred from initiating conflict against a trading partner, designated as the ‘target’, for fear of losing the welfare gains associated with trade. This article extends the trade–conflict model to examine the effect of country size on the trade gains among countries. We derive three propositions with regard to international interactions that pertain to the links between trade, conflict and country size. These hypotheses all imply that a country with an improvement in its terms of trade with a large country will decrease conflict more than it would with an improvement in its terms of trade with a small country. A 30‐country sample from the Conflict and Peace Data Bank (COPDAB) is used for empirical tests. The empirical analyses support the derived hypotheses. The model predicts that a country's ability to influence domestic consumption in a trading partner is an important determinant of international interactions.