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AbstractIn a seminal paper, Martin, Mayer, and Thoenig,The Review of Economic Studies, 2008,75(3), 865–900, show that bilateral trade decreases the probability of a militarized interstate dispute (MID), while multilateral trade increases it by allowing countries to decrease the opportunity cost of conflict through trade diversification. Lee and Pyun (2016) challenge this assertion by showing that both bilateral and multilateral trade flows reduce the likelihood of MID. This study develops an alternative measure of trade diversification based on Hirschman's (National power and the structure of foreign trade,1945, Berkley: University of California Press) market concentration index and estimates its effect on the probability of MID. We find that the estimated impact of trade diversification on MID depends crucially on the model's inclusion of the trade–distance interaction terms.

A World Public Opinion (WPO) poll revealed that no country leader enjoyed worldwide trust in 2008 and that only the leaders of China, Iran, and Russia received consistently higher trust ratings at home than abroad. In a new study, Pavel Yakovlev and David Gilson investigate the associative determinants of these trust ratings and find that economically open and politically free countries tend to have a more critical assessment of their leaders.

We estimate the effect of legislative term limits on various categories of state government spending using the most recent panel of 47 states from 1972 to 2005. Besides the usual economic, political, fiscal and demographic factors, we also control for the state tax and expenditure limitations. We find that term limits have a significant positive effect on total state government spending, but no significant positive effect on state education, health, transportation or welfare expenditures. This dichotomy in the estimates raises a very important and previously overlooked question: what budget category is responsible for higher state spending in term-limited states? Our analysis reveals that legislative term limits increase pork-barrel spending, which takes the form of higher transfers from state to local governments. This finding might also imply that legislative term limits lead to more fiscal decentralization.