The gains of neutrality - The impact of war on trade and finance of non-belligerent countries

This project has its origin in and relates to the literature on the impact and long-term effects of war on the economy. The purpose of the project is to provide a new comparative evaluation of the economic impact of war on non-belligerent vis-á-vis belligerent countries. In the literature, there is widespread agreement to the view that wars are highly disruptive to economic activity. Apart from the obvious direct costs of war (i.e. loss of lives, destruction of physical capital and so on), wars also carry indirect costs, in the form of lost foreign trade, distorted financial markets, costs of shifting the economy to a war footing, etc. which research suggests might be even larger than conventional estimates of the direct costs of war. Theoretically, such indirect costs should impact not only the belligerents themselves, but also third-party countries (i.e. non-belligerents).
Most research has, however, tended to focus solely on the experience of the belligerent countries, while potential effects on non-belligerents remain largely ignored. While the impact of war will most likely have varied across countries and depending on the nature of the conflict, it is very plausible that non-belligerents could, on average, have benefitted from the changing political and economic conditions brought on by war. As the economic exchange across enemy lines is cut, this opens up a host of possibilities for non-belligerent countries, to gain export market shares or reduced import prices, to function as intermediaries in transit trade, or as safe havens for flight capital. In this project we therefore test the hypothesis that wars and other forms of interstate conflicts have been associated with increasing shares of world trade and capital flows for non-belligerent countries. We test this hypothesis both on the bilateral and multilateral level, seeking to identify both absolute and relative effects. By adding a new research focus, employing up-to-date methods and a long historical perspective, examining world trade and capital flows for the whole of the period for which data are available, we hope to make a contribution to the international research on trade and economic integration.

Projektfinansiär

Jan Wallanders och Tom Hedelius Stiftelse samt Tore Browaldhs Stiftelse

Projektperiod

2015-2017

Medverkande

Peter Hedberg
Lars Karlsson

Kontaktperson

Peter Hedberg
Box 513
751 20 Uppsala
Peter.Hedberg@ekhist.uu.se