Atlantic Trade and the Decline of Conflict in Europe

62 Pages Posted: 14 Jan 2020 Last revised: 24 Mar 2020

See all articles by Reshad Ahsan

Reshad Ahsan

University of Melbourne

Laura Panza

University of Melbourne

Yong Song

University of Melbourne

Multiple version iconThere are 2 versions of this paper

Date Written: December 2019


We use over 250 years of conflict and market integration data to provide the first

quantitative evidence that Atlantic trade contributed to Europe's pacification between

1640 and 1896. While the decline in conflict in Europe during this period has been well

documented, the role of Atlantic trade has not been previously explored due to a lack

of historical trade data. We overcome this constraint by using wheat prices to calculate

time-varying measures of market integration between Europe and the New World,

which we use as a proxy for Atlantic trade. To identify the causal effects of Atlantic

trade, we exploit exogenous changes in wind patterns and tropical cyclone activity

over the Atlantic Ocean to instrument trade. Our results suggest that the growth in

Atlantic trade between the mid-17th to the early 19th century lowered the likelihood

of intra-European conflict onset by 14.90 percent from the baseline onset probability

of 2.02 percent. We find empirical support for two channels driving our results: first,

Atlantic trade led to an increase in real wages and a reduction in both army and navy

sizes in Europe. Second, we show that the possibility of forgone Atlantic trade acted

as a deterrent to conflict.

Keywords: Atlantic Trade, conflict, International Relations

JEL Classification: D74, F10, F51, N43

Suggested Citation

Ahsan, Reshad and Panza, Laura and Song, Yong, Atlantic Trade and the Decline of Conflict in Europe (December 2019). CEPR Discussion Paper No. DP14206. Available at SSRN:

Reshad Ahsan (Contact Author)

University of Melbourne ( email )

Melbourne, 3010

HOME PAGE: http://

Laura Panza

University of Melbourne ( email )

Yong Song

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053

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