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Collateral Damage: Trade Disruption and the Economic Impact of War

Author

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  • Alan M. Taylor
  • Reuven Glick

    (Department of Economics, University of California Davis)

Abstract

Conventional wisdom in economic history suggests that conflict between countries can beenormously disruptive of economic activity, especially international trade. Yet nothing is knownempirically about these effects in large samples. We study the effects of war on bilateral trade foralmost all countries with available data extending back to 1870. Using the gravity model, weestimate the contemporaneous and lagged effects of wars on the trade of belligerent nations andneutrals, controlling for other determinants of trade. We find large and persistent impacts of warson trade, and hence on national and global economic welfare. A rough accounting indicates that suchcosts might be of the same order of magnitude as the """"direct"""" costs of war, such as lost humancapital, as illustrated by case studies of World War I and World War II.

Suggested Citation

  • Alan M. Taylor & Reuven Glick, 2005. "Collateral Damage: Trade Disruption and the Economic Impact of War," Working Papers 309, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:309
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    References listed on IDEAS

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    More about this item

    Keywords

    trade;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • N40 - Economic History - - Government, War, Law, International Relations, 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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