of North Carolina life are necessarily constrained by complementarity and substitution relations in the household production process and by comparative Research here reported is part of a continuing study of the distribution of income, conducted by the National Bureau of Economic Research and funded by the National Science Foundation and the Office of Economic Opportunity. This report has not undergone the usual NBER review. We arc grateful to

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This article applies microeconomic theory to illustrate the plausibility of a relationship between international trade and conflict. It is argued that the mutual dependence established between two trading partners (dyads) is sufficient to raise the costs of conflict, there-by diminishing levels of dyadic dispute. This hypothesis of a negative relationship between conflict and trade is tested using a ten-year thirty-country cross section merged from four separate data sources. It is found that ceteris paribus countries with the greatest levels of economic trade engage in the least amounts of hostility. In fact, a doubling of trade on average leads to a 20% diminution of belligerence. This relationship appears robust, holding even more strongly when statistical adjustments are made for causality.