Working Paper: NBER ID: w15694
Authors: Daron Acemoglu; Pierre Yared
Abstract: Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today. We proxy militarism by spending on the military and the size of the military, and document that over the past 20 years, countries experiencing greater increases in militarism according to these measures have had lower growth in trade. Focusing on bilateral trade flows, we also show that controlling flexibly for country trends, a pair of countries jointly experiencing greater increases in militarism has lower growth in bilateral trade.
Keywords: Globalization; Militarism; Trade; Nationalism
JEL Codes: F01; F10; F52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| militarization (H56) | trade share relative to GDP (F10) |
| military spending (H56) | trade volume (F10) |
| militarization (in trading pairs) (H56) | bilateral trade growth (F10) |
| militarization (H56) | trade growth (when both countries experience increases) (F10) |