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Once an enemy, forever an enemy? the long-run impact of the Japanese invasion of China from 1937 to 1945 on trade and investment

Author

Listed:
  • Che, Yi
  • Du, Julan
  • Lu, Yi
  • Tao, Zhigang

Abstract

We are living in an increasingly globalized world yet with constant and endless conflicts among countries. While studies have uncovered the impacts of various economic factors and policy regimes on trade and investment, a much less understood issue is whether conflicts among countries have any, especially long-lasting, impacts on cross-border trade and investment. In this paper, we exploit one of the most important conflicts of the 20th century between what are currently the world's second and third largest economies, the Japanese invasion of China from 1937 to 1945, to investigate its long-run impact on contemporary trade and investment between the two countries. We find that Chinese regions that suffered more severe damage in the Japanese invasion are both less likely to trade with and trade less with Japan. Consistently, we also find that Japanese multinationals are less likely to invest in Chinese regions that suffered greater numbers of casualties during the Japanese invasion. Our study shows that historical animosity still matters for international trade and investment, despite the trend toward a flat world.

Suggested Citation

  • Che, Yi & Du, Julan & Lu, Yi & Tao, Zhigang, 2011. "Once an enemy, forever an enemy? the long-run impact of the Japanese invasion of China from 1937 to 1945 on trade and investment," MPRA Paper 38791, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38791
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    References listed on IDEAS

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    Cited by:

    1. repec:zbw:fubjbm:162845 is not listed on IDEAS
    2. Zijun Luo & Yonghong Zhou, 2016. "Gainers and Losers of Political Instability: Evidence from the Anti-Japanese Demonstration in China," Working Papers 1608, Sam Houston State University, Department of Economics and International Business.
    3. repec:bla:worlde:v:40:y:2017:i:9:p:1958-1988 is not listed on IDEAS
    4. repec:eee:inecon:v:108:y:2017:i:c:p:211-225 is not listed on IDEAS
    5. Lin, Faqin & Hu, Cui & Fuchs, Andreas, 2016. "How Do Firms Respond to Political Tensions? The Heterogeneity of the Dalai Lama Effect on Trade," Working Papers 0628, University of Heidelberg, Department of Economics.
    6. Fuchs, Andreas, 2016. "China’s Economic Diplomacy and the Politics-Trade Nexus," Working Papers 0609, University of Heidelberg, Department of Economics.
    7. repec:bla:scotjp:v:64:y:2017:i:3:p:310-326 is not listed on IDEAS
    8. (Sam) Kim, Seongseop & Prideaux, Bruce & Timothy, Dallen, 2016. "Factors affecting bilateral Chinese and Japanese travel," Annals of Tourism Research, Elsevier, vol. 61(C), pages 80-95.

    More about this item

    Keywords

    Sino-Japanese War; Trade; Foreign Direct Investment;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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