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The persistence of trade relocation from civil conflict

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  • Korn, Tobias
  • Stemmler, Henry

Abstract

This paper examines the lasting impact of civil conflicts on bilateral trade flows and the subsequent implications for economic recovery. Utilizing a novel estimation approach based on the structural gravity model of international trade, we demonstrate that importers shift their trade preferences away from exporters involved in civil conflicts. This effect persists even after the conflict has been resolved, as countries solidify their relocation decisions by reducing bilateral trade costs with alternative trading partners through Preferential Trade Agreements. Notably, the persistent trade relocation is more pronounced in the manufacturing sector, while it does not occur in the fuels sector. Our findings underscore the significance of supportive trade policies as effective tools for assisting nations in recovering from episodes of political violence. Furthermore, our estimation approach can be adapted to investigate the impacts of other unilateral shocks, such as natural disasters, or to analyze various bilateral dependent variables, including migration.

Suggested Citation

  • Korn, Tobias & Stemmler, Henry, 2025. "The persistence of trade relocation from civil conflict," Journal of Development Economics, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:deveco:v:172:y:2025:i:c:s0304387824001251
    DOI: 10.1016/j.jdeveco.2024.103376
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    More about this item

    Keywords

    Conflict and trade; Trade relocation; Gravity estimation; Economic development;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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