IDEAS home Printed from https://ideas.repec.org/p/cda/wpaper/309.html
   My bibliography  Save this paper

Collateral Damage: Trade Disruption and the Economic Impact of War

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://repec.dss.ucdavis.edu/files/NQvTZwSJaLPKyNhBg84anUDk/05-15.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 865-900.
    2. Christopher M. Meissner, 2003. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," American Economic Review, American Economic Association, vol. 93(1), pages 344-353, March.
    3. Taylor, Alan M. & Williamson, Jeffrey G., 1997. "Convergence in the age of mass migration," European Review of Economic History, Cambridge University Press, vol. 1(1), pages 27-63, April.
    4. Katherine Barbieri & Gerald Schneider, 1999. "Globalization and Peace: Assessing New Directions in the Study of Trade and Conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(4), pages 387-404, July.
    5. Marc Flandreau & Mathilde Maurel, 2005. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe," Open Economies Review, Springer, vol. 16(2), pages 135-152, April.
    6. Marc Flandreau & Mathilde Maurel, 2001. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It," Working Papers hal-01065006, HAL.
    7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    8. Charles H. Anderton & John R. Carter, 2001. "The Impact of War on Trade: An Interrupted Times-Series Study," Journal of Peace Research, Peace Research Institute Oslo, vol. 38(4), pages 445-457, July.
    9. S. Brock Blomberg & Gregory D. Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, November.
    10. John R. Oneal & Bruce Russett, 1999. "Assessing the Liberal Peace with Alternative Specifications: Trade Still Reduces Conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(4), pages 423-442, July.
    11. Irwin, Douglas A. & Tervio, Marko, 2002. "Does trade raise income?: Evidence from the twentieth century," Journal of International Economics, Elsevier, vol. 58(1), pages 1-18, October.
    12. Keith Jaggers & Ted Robert Gurr, 1995. "Tracking Democracy's Third Wave with the Polity III Data," Journal of Peace Research, Peace Research Institute Oslo, vol. 32(4), pages 469-482, November.
    13. Morrow, James D. & Siverson, Randolph M. & Tabares, Tressa E., 1998. "The Political Determinants of International Trade: The Major Powers, 1907–1990," American Political Science Review, Cambridge University Press, vol. 92(3), pages 649-661, September.
    14. Gregory D. Hess, 2003. "The Economic Welfare Cost of Conflict: An Empirical Assessment," CESifo Working Paper Series 852, CESifo.
    15. Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
    16. Goldin, Claudia D. & Lewis, Frank D., 1975. "The Economic Cost of the American Civil War: Estimates and Implications," The Journal of Economic History, Cambridge University Press, vol. 35(2), pages 299-326, June.
    17. repec:hal:spmain:info:hdl:2441/607 is not listed on IDEAS
    18. Maurice Obstfeld & Alan M. Taylor, 2003. "Sovereign risk, credibility and the gold standard: 1870-1913 versus 1925-31," Economic Journal, Royal Economic Society, vol. 113(487), pages 241-275, April.
    19. Peter A.G. van Bergeijk, 1994. "Economic Diplomacy, Trade And Commercial Policy," Books, Edward Elgar Publishing, number 447.
    20. Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, vol. 86(2), pages 52-56, May.
    21. Douglas Lemke & William Reed, 2001. "The Relevance of Politically Relevant Dyads," Journal of Conflict Resolution, Peace Science Society (International), vol. 45(1), pages 126-144, February.
    22. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    23. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    24. Mansfield, Edward D. & Pevehouse, Jon C., 2000. "Trade Blocs, Trade Flows, and International Conflict," International Organization, Cambridge University Press, vol. 54(4), pages 775-808, October.
    25. Thursby, Jerry G & Thursby, Marie C, 1987. "Bilateral Trade Flows, the Linder Hypothesis, and Exchange Risk," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 488-495, August.
    26. Antoni Estevadeordal & Brian Frantz & Alan M. Taylor, 2003. "The Rise and Fall of World Trade, 1870–1939," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 359-407.
    27. Solomon William Polachek, 1980. "Conflict and Trade," Journal of Conflict Resolution, Peace Science Society (International), vol. 24(1), pages 55-78, March.
    28. Pollins, Brian M., 1989. "Does Trade Still Follow the Flag?," American Political Science Review, Cambridge University Press, vol. 83(2), pages 465-480, June.
    29. Klein, Michael W. & Shambaugh, Jay C., 2006. "Fixed exchange rates and trade," Journal of International Economics, Elsevier, vol. 70(2), pages 359-383, December.
    30. Margolis, Howard, 1994. "The Nature of Rationality. By Robert Nozick. Princeton: Princeton University Press, 1993. 226p. $19.95. - The Concept of Political Judgment. By Peter J. Steinberger. Chicago: University of Chicago Pre," American Political Science Review, Cambridge University Press, vol. 88(3), pages 745-746, September.
    31. Robert C. Feenstra, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, November.
    32. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    33. Morrow, James D. & Siverson, Randolph M. & Tabares, Tressa E., 1999. "Correction to “The Political Determinants of International Trade”," American Political Science Review, Cambridge University Press, vol. 93(4), pages 931-933, December.
    34. Oneal, John R. & Russett, Bruce, 2001. "Clear and Clean: The Fixed Effects of the Liberal Peace," International Organization, Cambridge University Press, vol. 55(2), pages 469-485, April.
    35. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 08-45.
    36. repec:hal:wpspec:info:hdl:2441/607 is not listed on IDEAS
    37. Mansfield, Edward D. & Bronson, Rachel, 1997. "Alliances, Preferential Trading Arrangements, and International Trade," American Political Science Review, Cambridge University Press, vol. 91(1), pages 94-107, March.
    38. Frankel, Jeffrey A. & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements," Center for International and Development Economics Research, Working Paper Series qt5hf1z4rv, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    39. Reuveny Rafael, 2000. "The Trade and Conflict Debate: A Survey of Theory, Evidence and Future Research," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 6(1), pages 23-49, January.
    40. Katherine Barbieri & Jack S. Levy, 1999. "Sleeping with the Enemy: The Impact of War on Trade," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(4), pages 463-479, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Reuven Glick & Alan M. Taylor, 2010. "Collateral Damage: Trade Disruption and the Economic Impact of War," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 102-127, February.
    2. Rahman, Ahmed S., 2010. "Fighting the forces of gravity - Seapower and maritime trade between the 18th and 20th centuries," Explorations in Economic History, Elsevier, vol. 47(1), pages 28-48, January.
    3. Rangan Gupta & Giray Gozgor & Huseyin Kaya & Ender Demir, 2019. "Effects of geopolitical risks on trade flows: evidence from the gravity model," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 515-530, December.
    4. Klein, Michael W. & Shambaugh, Jay C., 2006. "Fixed exchange rates and trade," Journal of International Economics, Elsevier, vol. 70(2), pages 359-383, December.
    5. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069, Elsevier.
    6. Parlow, Anton, 2011. "Does trade promote peace? squared: a gravity equation in a rectangular panel world," MPRA Paper 36430, University Library of Munich, Germany.
    7. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    8. Barry Eichengreen & Arnaud Mehl & Livia Chițu, 2021. "Mars or Mercury redux: The geopolitics of bilateral trade agreements," The World Economy, Wiley Blackwell, vol. 44(1), pages 21-44, January.
    9. Jong-Wha Lee & Ju Hyun Pyun, 2016. "Does Trade Integration Contribute to Peace?," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 327-344, February.
    10. Vincenzo Bove & Leandro Elia & Petros G. Sekeris, 2014. "US Security Strategy and the Gains from Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 863-885, November.
    11. Keller, Wolfgang & Shiue, Carol, 2008. "Tariffs, Trains, and Trade: The Role of Institutions versus Technology in the Expansion of Markets," CEPR Discussion Papers 6759, C.E.P.R. Discussion Papers.
    12. Taylor, Alan M. & Wilson, Janine L.F., 2011. "International trade and finance: Complementaries in the United Kingdom 1870-1913 and the United States 1920-1930," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 268-288, February.
    13. Xianhua Wu & Yingying Wang & Lingjuan Yang & Shunfeng Song & Guo Wei & Ji Guo, 2016. "Impact of political dispute on international trade based on an international trade Inoperability Input-Output Model: A case study of the 2012 Diaoyu Islands Dispute," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 47-70, February.
    14. Caruso Raul, 2003. "The Impact of International Economic Sanctions on Trade: An Empirical Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 9(2), pages 1-36, April.
    15. Peter A.G. van Bergeijk, 2009. "Economic Diplomacy and the Geography of International Trade," Books, Edward Elgar Publishing, number 13518.
    16. Fida Karam & Chahir Zaki, 2016. "How did wars dampen trade in the MENA region?," Applied Economics, Taylor & Francis Journals, vol. 48(60), pages 5909-5930, December.
    17. James Yetman, 2007. "Currency Unions, Trade Flows And Capital Flows," Pacific Economic Review, Wiley Blackwell, vol. 12(2), pages 189-204, May.
    18. Knill, April & Lee, Bong-Soo & Mauck, Nathan, 2012. "Bilateral political relations and sovereign wealth fund investment," Journal of Corporate Finance, Elsevier, vol. 18(1), pages 108-123.
    19. Mr. Abdul d Abiad & Petia Topalova & Ms. Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 2011/003, International Monetary Fund.
    20. Kris James Mitchener & Marc Weidenmier, 2008. "Trade and Empire," Economic Journal, Royal Economic Society, vol. 118(533), pages 1805-1834, November.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:309. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Letters and Science IT Services Unit (email available below). General contact details of provider: https://edirc.repec.org/data/educdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.