The Economic Consequences of a War between PRC and Japan: A Simulation

Abstract

This paper introduces a new economic model of a wartime economy, the war economic capability model – WEC-Model. The WEC-Model assesses the economic impacts of countries thorough the possible scenario of war in three different stages: (i) initial conflict and diplomatic negotiations; (ii) military conflict; and (iii) winners and losers in the post-war stage. The analysis makes use of new indicators such as economic desgrowth (-δ), war intensity (αi), war losses (-π), economic wear (Π), level of war tension (ζ), level of diplomatic negotiations (η), and total economic leaking (Ωt).Lastly, we apply the WEC-Model to evaluate an imaginary war between the People’s Republic of China (PRC) and Japan.

Keywords: conflict, conflict management, asymmetric conflict, war

JEL Classification: R11, R12