War and Third-party Trade

Nizan Feldman, Tal Sadeh*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Few studies explain how wars affect trade with third parties. We argue that wartime trade policies should raise trade with friendly and enemy-hostile third parties but reduce trade with hostile and enemy-friendly third parties. At the same time, the private motivation of firms and households may be incompatible with national wartime trade policies and constrain the effectiveness of wartime trade policies. Our directed dyadic data set consists of almost all of the states from 1885 to 2000. Running a high definition fixed effects regression with two-way clustering of standard errors, we find that hostile third parties tended to reduce trade with a combatant state by roughly 30 percent. In addition, trade with third parties friendly to the enemy fell by a similar magnitude. In contrast, on average, war hardly affected trade with third parties because of substitution of war-ridden markets with third-party business partners.

Original languageEnglish
Pages (from-to)119-142
Number of pages24
JournalJournal of Conflict Resolution
Volume62
Issue number1
DOIs
StatePublished - 1 Jan 2018

Keywords

  • interstate conflict
  • militarized interstate disputes
  • political economy
  • trade

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