The persistence of trade relocation from civil conflict

authored by

Tobias Korn, Henry Stemmler

Abstract

This paper examines the lasting impact of civil conflicts on bilateral trade flows and the subsequent implications for economic recovery. Utilizing a novel estimation approach based on the structural gravity model of international trade, we demonstrate that importers shift their trade preferences away from exporters involved in civil conflicts. This effect persists even after the conflict has been resolved, as countries solidify their relocation decisions by reducing bilateral trade costs with alternative trading partners through Preferential Trade Agreements. Notably, the persistent trade relocation is more pronounced in the manufacturing sector, while it does not occur in the fuels sector. Our findings underscore the significance of supportive trade policies as effective tools for assisting nations in recovering from episodes of political violence. Furthermore, our estimation approach can be adapted to investigate the impacts of other unilateral shocks, such as natural disasters, or to analyze various bilateral dependent variables, including migration.

Organisation(s)

Institute of Macroeconomics

External Organisation(s)

Heidelberg University
World Bank

Type

Article

Journal

Journal of development economics

Volume

172

ISSN

0304-3878

Publication date

01.2025

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Development, Economics and Econometrics

Sustainable Development Goals

SDG 8 - Decent Work and Economic Growth, SDG 16 - Peace, Justice and Strong Institutions

Electronic version(s)

https://doi.org/10.1016/j.jdeveco.2024.103376 (Access: Open)