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How occupied France financed its own exploitation in World War II

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Author Info
Filippo Occhino () (Department of Economics, Rutgers University, New Brunswick.)
Kim Oosterlinck () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
Eugène N. White () (Department of Economics, Rutgers University, New Brunswick.)

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Abstract

The occupation payments made by France to Nazi Germany between 1940 and 1944 represent one of the largest recorded international transfers and contributed significantly to financing the overall German war effort. Using a neoclassical growth model that incorporates essential features of the occupied economy and the postwar stabilization, we assess the welfare costs of French policies that funded payments to Germany. Occupation payments required a 16 percent reduction of consumption for twenty years, with the draft of labor to Germany and wage and price controls adding substantially to this burden. Vichy’s postwar debt overhang would have demanded large budget surpluses; but inflation, which erupted after Liberation, reduced the debt well below its steady state level and redistributed the adjustment costs. The Marshall Plan played only a minor direct role, and international credits helped to substantially lower the nation’s burden.

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File URL: http://www.solvay.edu/EN/Research/Bernheim/documents/wp06012.pdf
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File Function: First version, 2006
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Publisher Info
Paper provided by Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number 06-012.RS.

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Length: 56 pages
Date of creation: Mar 2006
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Handle: RePEc:sol:wpaper:06-012

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Related research
Keywords: World War Two; France; Macroeconomy; Economic History; Exploitation.;

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Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
N1 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations
N4 - Economic History - - Government, War, Law, and Regulation

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References listed on IDEAS
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  1. Michael D. Bordo & Dominique Simard & Eugene White, 1996. "France and the Bretton Woods International Monetary System: 1960-1968," NBER Working Papers 4642, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Rockoff, Hugh, 1981. "Price and Wage Controls in Four Wartime Periods," The Journal of Economic History, Cambridge University Press, vol. 41(02), pages 381-401, June. [Downloadable!]
  3. Ellen R. McGrattan & Lee E. Ohanian, 2008. "Does neoclassical theory account for the effects of big fiscal shocks? Evidence from World War II," Staff Report 315, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  4. Oosterlinck, Kim, 2003. "The bond market and the legitimacy of Vichy France," Explorations in Economic History, Elsevier, vol. 40(3), pages 326-344, July. [Downloadable!] (restricted)
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  5. Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September. [Downloadable!] (restricted)
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  6. Piketty, Thomas, 2001. "Income Inequality in France 1901-98," CEPR Discussion Papers 2876, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Ohanian, Lee E, 1997. "The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War," American Economic Review, American Economic Association, vol. 87(1), pages 23-40, March. [Downloadable!] (restricted)
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