Collateral Damage: Trade Disruption and the Economic Impact of War

65 Pages Posted: 19 Oct 2006  

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies

Alan M. Taylor

University of California, Davis - Department of Economics; University of Virginia - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: August 2005

Abstract

Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. We study the effects of war on bilateral trade with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade as well as the possible effects of reverse causality. We find large and persistent impacts of wars on trade, on national income, and on global economic welfare. We also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured "direct" costs of war, such as lost human capital, as illustrated by case studies of World War I and World War II.

Suggested Citation

Glick, Reuven and Taylor, Alan M., Collateral Damage: Trade Disruption and the Economic Impact of War (August 2005). NBER Working Paper No. w11565. Available at SSRN: https://ssrn.com/abstract=788430

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies ( email )

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Alan M. Taylor (Contact Author)

University of California, Davis - Department of Economics ( email )

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HOME PAGE: http://www.econ.ucdavis.edu/faculty/amtaylor/

University of Virginia - Department of Economics ( email )

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HOME PAGE: http://people.virginia.edu/~amt7u

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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