Exit stage market: Market structure, interstate economic interdependence and conflict

This thesis addresses two questions regarding the presence and character of the relationship between international economic interdependence and political conflict. First, what is the role of the market and adaptation in economic interdependence? Second, does interdependence constrain or motivate interstate conflict, and if so, how? Economic interdependence is a function of exit costs, defined by market structure and asset specificity. Using this conceptualization, a strategic model of when and how interdependence influences the occurrence of interstate conflict is developed and examined empirically.; The market imposes structure on political and economic interaction between states. The potential costs states face in the event of exit by economic partners characterize economic interdependence. In turn, these exit costs are a function of the fungibility of the economic relationship. This fungibility delimits the range of economic behavior available to states and influences their pursuit of political and economic gains. A strategic model of economic exit in political bargaining addresses the second question of the existence and character of the relationship between interdependence and conflict. This model examines a bargaining process in which, using the threat of economic exit as leverage, one state seeks to extract demands from another. The analysis of the model suggests that when exit costs exceed an endurance threshold for at least one state, the threat of exit becomes a viable but limited bargaining tool. Exit costs which exceed this cost threshold will result in an increase in low-level conflict as states use economic and diplomatic tools to resolve demands; they also result in a decrease in high-level conflict as states take advantage of more efficient means of dispute resolution.; A multi-method approach provides an empirical examination of the exit model and its predictions. Case histories involving the U.S. and South Africa, China and the U.S., and Great Britain and Argentina illustrate the strengths and weaknesses of the exit model as an analytical tool. A more systematic investigation of the model and its predictions regarding how interdependence influences conflict follows using large-n statistical methods. The results provide support for the fundamental predictions of the model.