Alliance networks and trade: The effect of indirect political alliances on bilateral trade flows

Abstract

How does the network of international political alliances influence trade flows? Previous work suggests that alliances matter because governments align trade policies with national security interests and firms account for political relations when assessing risk. However, existing research focuses solely on direct political alliances, overlooking the broader structure of international alliance networks. I argue that states and firms consider both direct and indirect alliance relationships when shaping trade. I find that higher levels of trade occur when states have more shared alliances and when they belong to the same alliance community. Once indirect relationships are incorporated, the apparent effect of dyadic alliances diminishes sharply. Joint membership in an alliance community predicts an increase in trade more than twice the size of the effect of a dyadic alliance. This effect is especially strong for highly central states within the alliance network: states trade substantially more with central states in their own community and less with central states in other communities.

Cite

@article{haim2016alliance,
title={Alliance networks and trade: The effect of indirect political alliances on bilateral trade flows},
author={Haim, Dotan A},
journal={Journal of Peace Research},
volume={53},
number={3},
pages={472--490},
year={2016},
publisher={SAGE Publications}
}