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Collateral Damage: Trade Disruption and the Economic Impact of War

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Author Info
Reuven Glick
Alan M. Taylor

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Abstract

Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. We study the effects of war on bilateral trade with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade as well as the possible effects of reverse causality. We find large and persistent impacts of wars on trade, on national income, and on global economic welfare. We also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured "direct" costs of war, such as lost human capital, as illustrated by case studies of World War I and World War II.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11565.

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Date of creation: Aug 2005
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Handle: RePEc:nbr:nberwo:11565

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Find related papers by JEL classification:
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F10 - International Economics - - Trade - - - General
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
N40 - Economic History - - Government, War, Law, and Regulation - - - General, International, or Comparative
N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mirza, Daniel & Verdier, Thierry, 2007. "Are Lives a Substitute for Livelihoods? Terrorism, Security and US Bilateral Imports," CEPR Discussion Papers 6173, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Bennour, Khaled, 2008. "The Value of Rents and the Likelihood of Conflicts," MPRA Paper 8379, University Library of Munich, Germany. [Downloadable!]
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  3. Kris James Mitchener & Masato Shizume & Marc D. Weidenmier, 2008. "Why did Countries Adopt the Gold Standard? Lessons from Japan," Discussion Paper Series 228, Research Institute for Economics & Business Administration, Kobe University. [Downloadable!]
  4. Kris James Mitchener & Marc Weidenmier, 2008. "Trade and Empire," NBER Working Papers 13765, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Michael Hicks & Major Jeffrey S Smith, 2008. "Warfare, Civil Conflict and the Spatial Impacts on Domestic Investment: Evidence from South America, 1950-2000," Working Papers 200801, Ball State University, Department of Economics, revised Apr 2008. [Downloadable!]
  6. Lagerlöf, Nils-Petter & Tangerås, Thomas, 2005. "Human Capital, Rent Seeking, and a Transition from Stagnation to Growth," Working Paper Series 656, Research Institute of Industrial Economics. [Downloadable!]
  7. Vincent Vicard, 2006. "Trade, Conflicts, and Political Integration: the Regional Interplays," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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