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The Economic Consequences of a War in Iraq


  • William D. Nordhaus


Much has been written about the national-security aspects of a potential conflict with Iraq, but there are no studies of the cost. A review of several past wars indicates that nations historically have consistently underestimated the cost of military conflicts. This study reviews the potential costs of a conflict including the postwar expenses that might be required for occupation, humanitarian assistance, reconstruction, nation-building along with the implications for oil markets and macroeconomic activity. It considers two potential scenarios that span the potential outcomes, ranging from a short and relatively conflict-free case to protracted conflict with difficult and expensive postwar reconstruction and occupation. The estimates of the cost to the United States over the decade following hostilities range from $100 billion to $1.9 trillion.

Suggested Citation

  • William D. Nordhaus, 2002. "The Economic Consequences of a War in Iraq," NBER Working Papers 9361, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9361
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    Cited by:

    1. Wisniewski, Tomasz Piotr, 2016. "Is there a link between politics and stock returns? A literature survey," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 15-23.
    2. Rigobon, Roberto & Sack, Brian, 2005. "The effects of war risk on US financial markets," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1769-1789, July.
    3. Benedetto, Graziella & Rugani, Benedetto & Vázquez-Rowe, Ian, 2014. "Rebound effects due to economic choices when assessing the environmental sustainability of wine," Food Policy, Elsevier, vol. 49(P1), pages 167-173.
    4. Olaf J. de Groot, 2012. "Analyzing the costs of military engagement," Economics of Peace and Security Journal, EPS Publishing, vol. 7(2), pages 41-49, July.
    5. Benner, Joachim & Borbély, Dóra & Gern, Klaus-Jürgen & Kamps, Christophe & Kamps, Annette & Sander, Birgit & Scheide, Joachim, 2003. "Durchgreifende Erholung der Weltkonjunktur nochmals verzögert," Open Access Publications from Kiel Institute for the World Economy 2983, Kiel Institute for the World Economy (IfW).
    6. Huntington, Hillard G., 2004. "Shares, gaps and the economy's response to oil disruptions," Energy Economics, Elsevier, vol. 26(3), pages 415-424, May.
    7. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2006. "War in Iraq versus Containment," NBER Working Papers 12092, National Bureau of Economic Research, Inc.
    8. Tilman Brück & Olaf J de Groot & Friedrich Schneider, 2011. "The economic costs of the German participation in the Afghanistan war," Journal of Peace Research, Peace Research Institute Oslo, vol. 48(6), pages 793-805, November.
    9. Rose Adam Z. & Blomberg S. Brock, 2010. "Total Economic Consequences of Terrorist Attacks: Insights from 9/11," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-14, June.

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    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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