Can trade and security alliance help reduce interstate war?

This study explains how the gap between theory and empirical research hinders scientific progress in the area of international political economy. To demonstrate this point, I use Chen’s Extended Dependence Theory, which challenges liberal peace theory but fails to provide supporting empirical evidence. Chen contends that it is not trade dependence between two states that fosters peace but a challenger’s trade relations with the defense-pact partners of the target. Although Chen criticizes liberal peace proponents whose primary concern is how to deter war, his empirical analysis is confined to how to decrease (fatal) militarized disputes short of war. I argue that for his theory to succeed, it must be validated against the most severe and intense form of conflict. Using statistical tests and substantive significance, I uncover no peace-building effect, with regards to war, attributable to Extended Dependence. It appears that the Extended Dependence variable exhibits a ceiling effect. Future research should explain why economic ties and security institutions fail to work together to lower the risk of the most destructive form of conflict.