War and trade in the peaceful century: the impact of interstate wars on bilateral trade flows during the first wave of globalization, 1830–1913†

Lars Karlsson,Peter Hedberg

doi:10.1111/ehr.13053

Abstract

AbstractThis article examines the impact of war on trade between 1830 and 1913, that is, during the so‐called first wave of globalization. It has been argued that one of the main reasons for the rapid integration of commodity and factor markets that took place during this period was the peaceful character of the post‐Napoleonic nineteenth century. However, little research has been conducted on the actual impact of wars on international trade during this period. Previous research on the link between war and trade in general has found that war reduces trade both between belligerents and between belligerents and third parties (or neutrals). Apart from a handful of country case studies, this research has focused almost exclusively on the period before or after the peaceful nineteenth century. Our results show that, in the nineteenth century, the negative influence of war on trade was mainly limited to the belligerent economies, while belligerent–neutral trade was either unaffected or even increased during times of war. Also, in contrast to the findings of research on twentieth‐century wars, we find that nineteenth‐century wars had a strictly contemporaneous impact on trade, with a return to normalcy ensuing shortly after the cessation of hostilities.

Highlights

This article examines the impact of war on trade between 1830 and 1913, that is, during the so-called first wave of globalization
I n the decades following the end of the Napoleonic Wars, a sustained reduction in transportation costs and political barriers to trade spurred the integration of international commodity and factor markets in a process that has come to be known as the first wave of globalization
It is generally held that an important prerequisite for this development was the prolonged period of peace that endured from the Congress of Vienna in 1815 up until the outbreak of the First World War.[1]

Summary

KARLSSON AND HEDBERG

The nineteenth century was not void of military conflict. Between 1815 and 1913, no less than 38 interstate wars were fought, resulting in more than 1.5 million battle-related deaths.[4]. Inclusion of intra-national trade flows has the added benefit that it becomes possible to control for the effects of globalization, by constructing variables that account for average (across all country-pairs) declines in the cost of international relative to intra-national trade.[39] As exports are normally reported as gross value, gross national production figures should ideally be used when calculating intra-national trade Such data are, not available for our period, so we construct intra-national trade flows by subtracting total exports from nominal GDP.[40]. If we assume that both flows are incorrect, the average would still only approximate the correct figure under very specific conditions. 49 Federico and Tena-Junguito, ‘World trade’

Bilateral trade

No Yes Yes Yes Yes

OLS CPFE PPML HDFE

Methods

Findings

Supporting information