An Economic Model of the Wartime Economy: An Application to a Possible Sino-Japanese Conflict

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 impact of an armed conflict in three different stages: (1) initial armed conflict and diplomatic negotiations; (2) military armed conflict; and (3) winners and losers in the post-armed conflict stage. The analysis makes use of new indicators such as economic desgrowth (-d), armed conflict intensity (ai), armed conflict losses (-p), economic wear (P), level of armed conflict tension (f), level of diplomatic negotiations (g), and total economic leaking (Xt). To illustrate the model, we apply it to evaluate an imaginary armed conflict between the People’s Republic of China and Japan.

Keywords: Armed conflict, War, Economic modeling, Economic desgrowth

JEL Classification: R11, R12