Contrasting Theories: Do Alliances Boost Trade? Gravity Model Study, 1907-1990

This research investigates how international politics influences trade flows between major powers from 1907 to 1990.

➡️ Three Political Arguments Tested

• Similar political interests should increase trade.
• Democratic dyads (pairs of democracies) promote greater trade compared to non-democratic pairs.
• Alliances should stimulate increased trade flows between states.

➡️ Methodology & Data

We estimated a gravity model of trade, incorporating these three independent political variables. The long historical period provided variation across all key factors and allowed clear empirical separation between the arguments.

➡️ Key Findings

• Joint democracy significantly boosts trade in bilateral pairs.
• Shared interests also positively influence trade flows.
• Contrary to expectations, alliances do not consistently increase trade when considering system polarity.