From Generals to Diplomats : Post-Second World War Demilitarization as an Alternative Explanation of Accelerated Globalization

Beyond major advances in information technology, were there alternative factors shaping late-20th century globalization? Motivated by recent studies documenting the relation between demilitarization and expanded international trade, I assemble a panel dataset from the last 140 years of bilateral international trade flows, formal military alliances, and military capacity in a large set of countries. I uncover three stylized facts: (1) entry into formal defense agreements corresponds with reduced military capacity, (2) dyadic country pairs trade more when they are engaged in a formal military alliance, and (3) gains in trade from formal alliances are larger when country pairs reduce military capacity (i.e., demilitarization). These patterns hold when I exploit external military threats as an alternative source of variation