International Friends and Enemies

Sept. 30, 2020

Recent work by Benny Kleinman *23, Ernest Liu, and Stephen Redding sheds new light on debates about how economic and political interests align on the global stage, particularly with reference to the rise of China as an economic superpower. Their NBER working paper, "International Friends and Enemies," addresses two important questions. One, how does a country's economic growth affect the income and welfare of its international trading partners? Two, how do shifts in countries' relative economic sizes affect their political relations and the international balance of power?

Using historical data on 140 countries' bilateral trade over four decades (1970-2012), the authors find that generally, nations have become more economically interdependent, consistent with increasing globalization over this period. Characterizing these bilateral relationships as friends or enemies, the authors further find that as countries become greater economic friends, with productivity growth in one country promoting a partner's welfare, they also become greater political friends in terms of United Nations voting patterns and strategic rivalries. 

Read the VoxDev summary of their paper; another version is also available on VoxEU as "International friends and enemies: Modelling the evolution of trade relationships since 1970."

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