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How Much Does Violence Tax Trade?

  • S. Brock Blomberg
  • Gregory D. Hess

We investigate the empirical impact of violence as compared to other trade impediments on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose [2004] dataset, the ITERATE dataset for terrorist events, and datasets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism, as well as internal and external conflict is equivalent to as much as a 30 percent tariff on trade. This is larger than estimated tariff-equivalent costs of border and language barriers and tariff-equivalent reduction through GSPs and WTO participation.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-06/cesifo1_wp1222.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1222.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1222
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  1. Blomberg, S Brock, 1996. "Growth, Political Instability and the Defence Burden," Economica, London School of Economics and Political Science, vol. 63(252), pages 649-72, November.
  2. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
  3. Blomberg, S. Brock & Hess, Gregory D. & Weerapana, Akila, 2004. "Economic conditions and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 463-478, June.
  4. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  5. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  6. Subramanian, Arvind & Wei, Shang-Jin, 2005. "The WTO Promotes Trade, Strongly But Unevenly," CEPR Discussion Papers 5122, C.E.P.R. Discussion Papers.
  7. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
  8. S. Brock Blomberg & Gregory D. Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," CESifo Working Paper Series 1151, CESifo Group Munich.
  9. Gregory D. Hess & Athanasios Orphanides, 1999. "War and Democracy," CESifo Working Paper Series 201, CESifo Group Munich.
  10. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  11. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
  12. Hess, Gregory D & Orphanides, Athanasios, 1995. "War Politics: An Economic, Rational-Voter Framework," American Economic Review, American Economic Association, vol. 85(4), pages 828-46, September.
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