A giant in the postwar study of international relations. Helped invent regional integration studies. Introduced systematic social science concepts and methods into the study of international organization, emphasizing how structures, interests, and actor learning interact to produce institutional transformation. Was instrumental in International Organization becoming the leading journal in the field.

International relations scholars increasingly debate when and how international institutions influence domestic policy. This examination of ethnic politics in four Baltic and East European countries during the 1990s shows how European institutions shaped domestic policy, and why these institutions sometimes failed. Comparing traditional rational choice mechanisms such as membership conditionality with more socialization-based efforts, I argue that conditionality motivated most behavior changes, but that socialization-based efforts often guided them. Furthermore, using new case studies, statistics, and counterfactual analysis, I find that domestic opposition posed far greater obstacles to socialization-based methods than it did to conditionality: when used alone, socialization-based methods rarely changed behavior; when they did, the domestic opposition was usually low and the effect was only moderate. In contrast, incentive-based methods such as membership conditionality were crucial in changing policy: As domestic opposition grew, membership conditionality was not only increasingly necessary to change behavior, but it was also surprisingly effective.Many panel and seminar participants have offered useful comments on this work, but my thanks goes in particular to Michael Zürn, Alexandra Gheciu, Frank Schimmelfennig, Jeff Checkel, Robert Keohane, Steven Wilkinson, Robert Putnam, Milada Vachudova, and the editors and anonymous reviewers of International Organization. I also thank Princeton University Press for allowing me to use material from my book Ethnic Politics in Europe: The Power of Norms and Incentives. The usual caveats apply. This research was funded by a grant from the Danish Research Academy (former Forskerakademiet), and by travel support from the Weatherhead Center for International Affairs at Harvard.

In this article, I make two primary contributions to the literature on international cooperation. First, I present a simple version of Fearon's bargaining and enforcement model and show that impatience (as captured in the discount factor) can be a source of bargaining strength when the outcome of the bargaining phase is followed by an enforcement phase that resembles a prisoners' dilemma. Second, I illustrate how to apply this model to the question of the division of cartel profits within the Organization of Petroleum Exporting Countries (OPEC), particularly with regard to the relationship between bargaining strength and disparate time horizons. I find that for some critical threshold level, states that discount the future more heavily tend to receive better oil production offers than those that do not. I examine empirical evidence that suggests that countries in OPEC fall into the range where this proposition holds; in other words, relatively poor, populous countries and relatively unstable ones are allowed by OPEC to overproduce.I am grateful to Christino Arroyo, Jim DeNardo, Joe Gochal, James Honaker, Shuhei Kurizaki, Drew Linzer, Barry O'Neill, Art Stein, Hiroki Takeuchi, George Tsebelis, Jana von Stein, and two anonymous referees for helpful comments. I am especially indebted to Ken Schultz for his advice and to Randy Calvert for a helpful discussion during the 2003 EITM Summer Institute at Washington University in St. Louis.

Debates over how ideas matter in international relations have come to occupy a key place in the field. Through a reexamination of the thinking of Hans Morgenthau, this article seeks to recover a tradition of classical realism that stressed the role of ideas in both the construction of action and in political and ethical judgment. Locating Morgenthau's understanding of politics against the background of the oppositional “concept of the political” developed by the controversial jurist Carl Schmitt shows how Morgenthau's realism attempts to recognize the centrality of power in politics without reducing politics to violence, and to preserve an open and critical sphere of public political debate. This understanding of Morgenthau's realism challenges many portrayals of his place in the evolution of international relations, and of the foundations of realist thought. However, it is also of direct relevance to current analyses of collective identity formation, linking to—and yet providing fundamental challenges for—both realist and constructivist theories.For helpful and insightful comments on this article in its wide variety of previous incarnations, I would like to thank Michael Barnett, James Der Derian, Randall Germain, Alexandra Gheciu, Stefano Guzzini, Jef Huysmans, Oliver Jutersönke, Jennifer Mitzen, Vibeke Schou Pedersen, and especially Rita Abrahamsen and Richard Wyn Jones. Previous drafts were presented at the 2002 meetings of the British International Studies Association, and at the Department of Political Science and International Studies, University of Birmingham, United Kingdom. My thanks also to the participants at those sessions.

Do the macroeconomic priorities of citizens differ across countries? If so, what accounts for this variation and what are its consequences for explanations of the choice of monetary institutions, macroeconomic policy, and international monetary cooperation? This article uses survey data from twenty advanced economies to examine individual preferences about macroeconomic priorities. The analysis establishes three key findings. First, the results suggest that economic context, defined by inflation and unemployment performance, has a substantial impact on the public's economic objectives in a way that is broadly consistent with the specification of utility/loss functions in the theoretical political economy literature. Second, the results suggest that there is significant cross-country variation in inflation aversion, controlling for economic context. Third, some of this variation is accounted for by national-level factors affecting the aggregate costs of inflation and unemployment. These results have significant implications for optimal monetary policymaking, the explanation of variation in economic outcomes, and for accounts of the choice of institutional frameworks for policymaking.I thank the Bank of England, the Center for Basic Research in the Social Sciences, and the Institution for Social and Policy Studies for research support, and Jim Alt, Andrew Bailey, Bill Bernhard, Lawrence Broz, John Freeman, Jeff Frieden, Jim Granato, Shigeo Hirano, David Lake, Jeff Lax, Simon Price, Rose Razaghian, Ron Rogowski, David Stasavage, Gabriel Sterne, Mike Tomz, Jim Vreeland, the editor, and two anonymous reviewers for helpful comments. All views expressed are those of the author and do not represent those of the Bank of England.

It is commonly thought that there is a trade-off between the breadth and depth of multilateral institutions—that is, multilaterals that are more inclusive in their memberships will necessarily be shallower in their level of cooperation. Using a multilateral bargaining model with self-seeking rational actors, I show that such a trade-off does not exist for a broad class of multilateral cooperation problems. The conclusion that there is a broader-deeper trade-off follows from the assumption that the members of the multilateral must set their policies at an identical level. The multilateral agreement modeled in this article allows states to set their policies at different levels. Once this change is made, there is no broader-deeper trade-off, a finding that has obvious empirical and policy implications. It explains why some regimes are created with fairly large memberships at the outset, and it calls into question the policy prescription of limiting membership of multilateral institutions to a small group of committed cooperators for the class of cooperation problems modeled in this article.I am indebted to the editor, an anonymous reviewer, Bruce Bueno de Mesquita, William Clark, Eric Dickson, Catherine Hafer, Charles Holt, Marek Kaminski, Dimitri Landa, Antonio Merlo, Robert Powell, Adam Przeworski, Ann Sartori, Shanker Satyanath, Randall Stone, and the participants at seminars at Rutgers and University of California-Berkeley in May and October 2000, respectively, for comments on earlier drafts of this work. I thank Jon Preimesberger for editorial assistance. All errors remain my responsibility.

Questions about norm diffusion in world politics are not simply about whether and how ideas matter, but also which and whose ideas matter. Constructivist scholarship on norms tends to focus on “hard” cases of moral transformation in which “good” global norms prevail over the “bad” local beliefs and practices. But many local beliefs are themselves part of a legitimate normative order, which conditions the acceptance of foreign norms. Going beyond an existential notion of congruence, this article proposes a dynamic explanation of norm diffusion that describes how local agents reconstruct foreign norms to ensure the norms fit with the agents' cognitive priors and identities. Congruence building thus becomes key to acceptance. Localization, not wholesale acceptance or rejection, settles most cases of normative contestation. Comparing the impact of two transnational norms on the Association of Southeast Asian Nations (ASEAN), this article shows that the variation in the norms' acceptance, indicated by the changes they produced in the goals and institutional apparatuses of the regional group, could be explained by the differential ability of local agents to reconstruct the norms to ensure a better fit with prior local norms, and the potential of the localized norm to enhance the appeal of some of their prior beliefs and institutions.I thank Peter Katzenstein, Jack Snyder, Chris Reus-Smit, Brian Job, Paul Evans, Iain Johnston, David Capie, Helen Nesadurai, Jeffrey Checkel, Kwa Chong Guan, Khong Yuen Foong, Anthony Milner, John Hobson, Etel Solingen, Michael Barnett, Richard Price, Martha Finnemore, and Frank Schimmelfennig for their comments on various earlier drafts of the article. This article is a revised version of a draft prepared for the American Political Science Association annual convention, San Francisco, 29 August–2 September 2001. Seminars on the article were offered at the Belfer Center for Science and International Affairs, Harvard University, in April 2001; the Modern Asia Seminar Series at Harvard University's Asia Center, in May 2001; the Department of International Relations, Australian National University, in September 2001; and the Institute of International Relations, University of British Columbia, in April 2002. I thank these institutions for their lively seminars offering invaluable feedback. I gratefully acknowledge valuable research assistance provided by Tan Ban Seng, Deborah Lee, and Karyn Wang at the Institute of Defence and Strategic Studies. I am also grateful to Harvard University Asia Centre and the Kennedy School's Asia Pacific Policy Program for fellowships to facilitate my research during 2000–2001.

In recent years there have been numerous calls for making the operations of international organizations more “transparent.” One element in these demands involves the idea that international negotiations should be open to the same level of outside scrutiny that is presumed to prevail with bargaining in domestic contexts. While transparency of this sort may have clear benefits by facilitating attempts to hold officials accountable, scholars have made less effort to consider whether making international bargaining more public might also have detrimental effects. I develop a game-theoretic model that provides four hypotheses about the relative benefits of open-door versus closed-door bargaining, and about the preferences of different actors with regard to this type of transparency. This model, which can be applied to international and domestic contexts, helps extend positive theories about the design of institutions while also providing insights for the normative question of when transparency is desirable. I show that the hypotheses developed are supported both by historical evidence from eighteenth-century disputes about publicity in national parliaments, and by evidence from the more recent dispute about making European Council of Ministers deliberations public.I would like to thank Simon Hix, Bernard Manin, Lisa Martin, John Odell, Andrea Prat, Ken Scheve, Karen Smith, Andrew Walter, Peter Wilson, seminar participants at the LSE and at Sciences-Po in Paris, as well as two anonymous referees for helpful comments and suggestions.

This article examines the implications of the rising density of international institutions. Despite the rapid proliferation of institutions, scholars continue to embrace the assumption that individual regimes are decomposable from others. We contend that an increasingly common phenomenon is the “regime complex:” a collective of partially overlapping and nonhierarchical regimes. The evolution of regime complexes reflects the influence of legalization on world politics. Regime complexes are laden with legal inconsistencies because the rules in one regime are rarely coordinated closely with overlapping rules in related regimes. Negotiators often attempt to avoid glaring inconsistencies by adopting broad rules that allow for multiple interpretations. In turn, solutions refined through implementation of these rules focus later rounds of negotiation and legalization. We explore these processes using the issue of plant genetic resources (PGR). Over the last century, states have created property rights in these resources in a Demsetzian process: as new technologies and ideas have made PGR far more valuable, actors have mobilized and clashed over the creation of property rights that allow the appropriation of that value.We are grateful for comments on early drafts presented at Stanford Law School, New York University Law School, Duke Law School, Harvard Law School, and the American Society for International Law. Thanks especially to Larry Helfer, Tom Heller, Robert Keohane, Benedict Kingsbury, Peter Lallas, Lisa Martin, Ron Mitchell, Sabrina Safrin, Gene Skolnikoff, Richard Stewart, Chris Stone, Buzz Thompson, Jonathan Wiener, Katrina Wyman, Oran Young, and two anonymous reviewers for their feedback. Kal Raustiala thanks the Program on Law and Public Affairs at Princeton for support. We also thank our research assistants, Lindsay Carlson, Lesley Coben and Joshua House.

How have market and state shaped the long-term coevolution of economic performance and social protection during the nineteenth century and post–World War II waves of globalization associated with British laissez-faire liberalism and U.S.-embedded liberalism? Under the impulse of seemingly ever-intensifying globalization, this question is emerging at the core of a novel body of political economy research that seeks to compare the two waves of globalization to draw useful lessons from the past. This research also reflects the concerns recently voiced by neoliberals and neointerventionists about the long-term stability and viability of post–World War II embedded liberalism. Satisfactory investigations of how market and state shape the long-term coevolution of economic performance and social protection in the two regimes remain lacking. Cointegration analyses of the two hegemonic powers that shaped the evolution of the two regimes—nineteenth-century Great Britain and post–World War II United States—demonstrate that the complementarity of market and state in embedded liberalism is associated with better long-term economic performance and social protection.I thank the following people for their help and support in developing this project: Katarina Juselius, Soren Johansen, Mike Artis, Ilijan Georgiev, Suzanne Perry, Ed Mansfield, Dennis Quinn, Lars-Erik Cederman, Ron Jepperson, Mark Kesselman, Luis Moreno, Martin Rhodes, Benedicta Marzinotto, Ron King, David Clinton, and the participants in the Nordic Project funded by the Danish Social Sciences Research Council. Two anonymous reviewers provided valuable suggestions. A Jean Monnet Fellowship from the Robert Schuman Center for Advanced Studies at the European University Institute provided financial support for the project. Any errors are my own.

Do institutions help explain macroeconomic performance? This article addresses two issues. First, especially given the practical implications of the literature, measurement of institutions should avoid tautologies, and therefore this study uses econometrics to estimate the effect of objectively measurable institutions such as labor market organization, financial development, fiscal federalism, and political regime-type. Second, the growing literature on these promising factors, in turn, is unfortunately incommensurable because previous studies fail to control for other institutional and, in some cases, standard economic variables. Given data on up to ninety-four countries from 1961 through 2000, extreme-bound analysis (EBA), an econometric technique that addresses the sensitivity of previous findings to alternative assumptions about model specification, suggests that some institutions associated with the organization of labor and capital are robust correlates of investment. Few data support the view that variables related to the organization of the state, including fiscal federalism and political regime-type, affect macroeconomic performance.Without implication, the author thanks Richard Nelson, Doug Chalmers, Robert Shapiro, Alessandra Casella, Brendan O'Flaherty, Geoffrey Garrett, Alexander Hicks, Brett Hammond, Mark Kesselman, the editor (Lisa Martin), and two anonymous referees for helpful comments. Also, Ross Levine, Peter Rousseau, Geoffrey Garrett, and Torben Iversen were very helpful in locating data. The views expressed in this article do not necessarily reflect those of the Board of Governors of the Federal Reserve System or any member of its staff.

Recent studies have found that natural resources and civil war are highly correlated. Yet the causal mechanisms behind the correlation are not well understood, in part because data on civil wars is scarce and of poor quality. In this article I examine thirteen recent civil wars to explore the mechanisms behind the resource-conflict correlation. I describe seven hypotheses about how resources may influence a conflict, specify the observable implications of each, and report which mechanisms can be observed in a sample of thirteen civil wars in which natural resources were “most likely” to have played a role. I find that two of the most widely cited causal mechanisms do not appear to be valid; that oil, nonfuel minerals, and drugs are causally linked to conflict, but legal agricultural commodities are not; and that resource wealth and civil war are linked by a variety of mechanisms, including several that others had not identified.For their comments on earlier drafts, I am grateful to Paul Collier, J. R. Deshazo, Pierre Englebert, Barbara Geddes, Anke Hoeffler, Macartan Humphreys, Philippe Le Billon, Roy Licklider, Dan Posner, Ken Shultz, and Libby Wood.

What is the impact of economic insecurity on the development of institutions of social insurance? Existing studies have examined this question by exploring the impact of various measures of economic volatility on aggregate government expenditures or revenues. These aggregate data are, however, an imperfect proxy of the character of institutions of social protection. To overcome the limitations of earlier studies, this article explores the conditions under which economic insecurity leads to the extension of the level of social insurance coverage. I argue that economic insecurity sharpens a sectoral cleavage between coalitions in “high-risk” and “low-risk” sectors. Workers (and some employers) in high-risk sectors will favor the introduction of social insurance institutions characterized by broad levels of coverage and a high redistribution of costs across occupations. In contrast, a cross-class alliance in low-risk sectors will oppose proposals aiming at the introduction of redistributive social policies, fearing that these policies will turn them into subsidizers of high-risk industries. A redistributive social insurance policy will be introduced only if the “high-risk” coalition is larger. The article tests both the micro- and macro-level implications of this theory, by examining the development of unemployment insurance policies in interwar Europe.I gratefully acknowledge comments from Carles Boix, Peter Gourevitch, and two anonymous referees. Many thanks to Stefano Bartolini, John Fitzgerald, and Michael Tomz for sharing data with me.

This article examines the key ethical questions in the design of labor immigration programs. We propose a two-dimensional matrix of ethical space that isolates a number of different ethical frameworks on the basis of the degree of consequentialism they allow and the moral standing they accord to noncitizens. We argue for the rejection of extreme ethical frameworks and propose criteria that should guide national policymakers in their choice and application of a framework within the ethical subspace of moderate consequentialism and moderate moral standing for noncitizens. To translate these “ethical guidelines” for the design of labor immigration programs into policy practice, we advocate new types of temporary foreign worker programs. In contrast to many existing and past guest worker policies, the programs that we propose would more actively promote the interests of migrant workers and sending countries by more clearly defining, and more effectively enforcing, certain core rights of migrant workers.For their helpful comments, we would like to thank Manolo Abella, Rainer Bauböck, Thomas Bräuninger, Wayne Cornelius, Clare Fox, David Heer, Jessica Heynis, Robert Holton, Eddie Hyland, Miles Kahler, Alan Kessler, Christian Klamler, Christoph Kuzmics, Phil Martin, Gail McElroy, Robert McLaughlin, Onora O'Neill, Nalini Persram, Thomas Pogge, Carlos Rodriguez, Robert Rowthorn, John Sender, Patrick Taran, Takeyuki Tsuda, Patrick Weil, two anonymous referees, and especially the editors of this journal. Martin Ruhs gratefully acknowledges financial support from the Cambridge European Trust, the Cambridge Political Economy Society Trust, the Center for Comparative Immigration Studies at the University of California-San Diego, and the Policy Institute at Trinity College Dublin. Most of this article was written while Martin Ruhs was a Ph.D. candidate at the Faculty of Economics and Politics, University of Cambridge, and a Visiting Research Fellow at both the Center for Comparative Immigration Studies at the University of California-San Diego, and the Policy Institute at Trinity College Dublin. Ha-Joon Chang wishes to thank the Korea Research Foundation for its research support through the BK21 program at the Department of Economics, Korea University, where he was a Visiting Research Professor when the manuscript was completed.

In the past fifteen years, financial regulators from the developed world have attempted to create international regulatory standards in a variety of financial issue areas. Their negotiations are notable for the stark variation in the preferences of regulators toward international regulatory harmonization. Certain regulators actively resist any attempts at regulatory harmonization, while others are vocal in their advocacy for an international agreement. When will regulators seek to harmonize their rules with their foreign counterparts? I propose a principal-agent framework for analyzing regulator behavior that views international harmonization as a means of satisfying domestic political pressures. The framework predicts that regulators are more likely to seek international regulatory harmonization when confidence in the stability of financial institutions is declining, and when competitive pressures are increasing from foreign firms facing less stringent regulations. I explore the consistency of the framework with two important cases in the history of international financial regulation: the negotiations among bank regulators leading up to the 1988 Basel Accord on bank capital adequacy, and the negotiations among securities regulators over capital adequacy for securities firms between 1988 and 1992.I thank Gabe Aguilera, David Bach, Ethan Bueno de Mesquita, Dan Carpenter, Bill Clark, Mark Copelovitch, Jeff Frieden, Dan Gingerich, Dan Ho, Devesh Kapur, Joseph N. R. Sanberg, Ross Schaap, Allan Stam, Matt Stephenson, two anonymous reviewers, and the editors of IO for helpful comments, discussions, and feedback. I am also indebted to the thirty current and former regulators and financial industry executives who participated in interviews to advance this project. Finally, I thank the Weatherhead Center for International Affairs and the Center for European Studies for research funding.

Under what conditions do states die? Survival is often assumed to be the primary goal of states. Yet international relations scholars have not previously examined the rate or the causes of state death in a systematic way. I argue that buffer states—states caught between two rivals—are particularly vulnerable to being coerced out of existence. Each rival is afraid that its opponent will conquer the buffer that lies between them, gaining strength and strategic advantage. The rivals' inability to credibly commit to preserving the buffer state's sovereignty means that buffer states are extremely vulnerable to conquest. Using event history analysis, I test this argument while controlling for traditional realist variables such as power and alliances, as well as for changes in the post–World War II era. The analysis generates three major findings: buffer states are significantly more likely to die than are nonbuffer states; violent state death (conquest and occupation) virtually ceases after 1945; and the relationship between power and state survival is tenuous.For their valuable comments and suggestions, I thank James Fearon, Page Fortna, Erik Gartzke, Hein Goemans, Simon Jackman, Stephen Krasner, David Lewis, Scott Sagan, Erik Voeten, the editor of IO, two anonymous reviewers, as well as seminar participants at Stanford University, Harvard University, the University of Chicago, and the University of Virginia Law School. Earlier versions of this article were presented at the 2000 Annual Meetings of the International Studies Association and the American Political Science Association. Jessica Stanton provided valuable research assistance. I gratefully acknowledge the support of the Center for International Security and Cooperation and the John M. Olin Institute for Strategic Studies. Any errors are my own.

A substantial body of research suggests that the United States has a distinctive legal style characterized by detailed rules, extensive transparency requirements, adversarial procedures for dispute resolution, costly legal contestation involving many lawyers, and frequent judicial intervention in administrative affairs. Recently, scholars of comparative law and public policy have asked whether this American legal style is spreading around the world. Some scholars have argued that legal styles are converging on an American model, while others have argued that distinctive national legal styles will persist. This article addresses this emerging debate. We argue that American legal style is spreading to other jurisdictions. However, we depart from predominant explanations, which attribute convergence to international regulatory competition or emulation. Instead, we argue that economic liberalization and political fragmentation have undermined traditional approaches to regulation and have generated functional pressures and political incentives to shift toward American legal style.The authors thank Kenneth Abbott, Ward Bower, Kent Calder, Robert G. DeLaMater, Tom Ginsburg, Jack Goldsmith, Milton Heumann, Mark D. Hunsaker, Nicolas Jabko, Robert Kagan, Susan Lawrence, Kathleen McNamara, Michael Paris, Mark Ramseyer, Amy Searight, Anne-Marie Slaughter, Tatsushi Terada, David Vogel, Albert Yoon, and participants in presentations at the 2001 International Studies Association Convention, the 2001 American Political Science Association Convention, Northwestern University's Center for International and Comparative Studies, the University of Chicago Law School, and Princeton University's Center of International Studies for their comments on earlier versions of the article. The authors thank Rachael Snyder, Fatima Khan, Hisako Yamamoto, Masako Ishiwata, and Kei Yamaguchi for their research assistance and Akiko Tsuda, Akemi Ideuchi, and Mio Kato for secretarial assistance. Kelemen thanks the Frank Kneller Fund at Rutgers University and the Center of International Studies at Princeton University for financial support. Views expressed herein are those of the authors alone and are not necessarily those of any institutions with which they are affiliated.

Since Munich, appeasement—a policy of making unilateral concessions in the hope of avoiding conflict—has been considered a disastrous strategy. Conceding to one adversary is thought to undermine the conceder's reputation for resolve, provoking additional challenges. Kreps, Wilson, Milgrom, and Roberts formalized this logic in their 1982 solutions to the “chain-store paradox.” I show with a series of models that if a state faces multiple challenges and has limited resources, the presumption against appeasement breaks down: appeasing in one arena may then be vital to conserve sufficient resources to deter in others. I identify “appeasement” and “deterrence” equilibria, and I show that when the stakes of conflict are either high or low, or when the costs of fighting are high, only appeasement equilibria exist. I illustrate the result with discussions of successful appeasement by Imperial Britain and unsuccessful attempts at reputation-building by Spain under Philip IV.I thank Rui de Figueiredo, Jim Fearon, Tim Groseclose, David Laitin, Ed Mansfield, James Morrow, Barry O'Neill, Bob Powell, Lawrence Saez, Ken Schultz, Art Stein, Marc Trachtenberg, Romain Wacziarg, Justin Wolfers, and other participants in seminars at the University of California, Berkeley, Stanford University, and the 2002 American Political Science Association meeting for helpful comments.

We test how domestic political institutions moderate the effect of leadership turnover on relations between states. Deriving hypotheses from recent theoretical work, Bueno de Mesquita et al. and McGillivray and Smith, we examine how leader change affects trading relations between states using dyadic trade data. Consistent with hypotheses, we find that large winning coalition systems, such as democracies, are relatively immune from the vagaries of leadership change. In such systems, trade remains relatively constant whether leader change occurs or not. In contrast, when winning coalition size is small, as in autocratic states, leadership change profoundly alters relations, causing a decline in trade. Finally, we examine instances of poor relations, measured by a significant decline in trade compared to historical levels. As predicted, instances of poor relations are less common between pairs of democracies than other dyadic pairings. Further, leadership turnover in autocratic systems restores trading relations between states. The effect of leadership change in democracies is much less pronounced.An earlier version of this article was prepared for the 2002 Peace Science Society meeting in Tucson, Arizona. We gratefully acknowledge the financial support of the National Science Foundation, SES-0226926. We thank John Oneal and Bruce Russett for generously making their data available to us. We thank audiences at New York University, the University of Rochester, Yale University, and several anonymous reviewers for their helpful comments.

The “new” trade theory and standard trade theory make different predictions about the composition and distribution of trade flows. Empirical evidence suggests that an increasing share of international trade consists of differentiated products, a consequence of increasing returns to scale. Nonetheless, the existing political science literature typically assumes that the conditions of standard theory hold. As such, the literature ignores the dynamic-inconsistency problem that imperfect markets can create. In doing so, it also ignores the fact that imperfect markets can shift the political prerequisites of open international markets. In this article we examine these shifts. We argue that alliances can support an optimal level of trade when scale economies rather than differences in relative factor endowments motivate it. Our empirical results support this argument, indicating that alliances exert a stronger influence on trade in goods produced under conditions of increasing rather than constant returns to scale.Earlier versions of this article were presented at the 2002 Annual Meeting of the American Political Science Association, Boston; the 2002 Annual Convention of the International Studies Association, New Orleans; and seminars at the University of Chicago (PIPES), the University of Colorado, Cornell University, Dartmouth College, New York University, the University of Pennsylvania, and Yale University. For helpful comments and suggestions, we are grateful to participants in these seminars and to Regina Baker, Bruce Bueno de Mesquita, William Clark, Benjamin Cohen, Christina Davis, Eric Fisher, Avery Goldstein, Stephen Kobrin, Lisa Martin, Patrick McDonald, Helen Milner, Robert Powell, Dan Reiter, Anne Sartori, Branislav Slantchev, and Beth Yarbrough. We are also grateful to Regina Baker and Patrick McDonald for research assistance.