Collateral Damage: Trade Disruption and the Economic Impact of War

FRB of San Francisco Working Paper No. 2005-11

54 Pages Posted: 2 Oct 2005

See all articles by Reuven Glick

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; 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. Yet nothing is known empirically about these effects in large samples. We study the effects of war on bilateral trade for almost all countries 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. We find large and persistent impacts of wars on trade, and hence on national and global economic welfare. A rough accounting indicates that such costs might be of the same order of magnitude as the "direct" costs of war, such as lost human capital, as illustrated by case studies of World War I and World War II.

Keywords: War, international trade

Suggested Citation

Glick, Reuven and Taylor, Alan M., Collateral Damage: Trade Disruption and the Economic Impact of War (August 2005). FRB of San Francisco Working Paper No. 2005-11, Available at SSRN: https://ssrn.com/abstract=810824 or http://dx.doi.org/10.2139/ssrn.810824

Reuven Glick (Contact Author)

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

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Alan M. Taylor

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

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

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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HOME PAGE: http://cepr.org

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