Comparative Economic Studies

, Volume 54, Issue 3, pp 553–579 | Cite as

Disentangling the Impact of Wars and Sanctions on International Trade: Evidence from Former Yugoslavia

  • Olivier Lamotte
Regular Article
First Online:

Abstract

Wars and sanctions tend to reduce the trade of the countries involved. However, these events often occur concurrently, which complicates the assessment of their effects. This article studies the case of the former Yugoslavia to disentangle the respective effects of these events. We show that the wars and sanctions caused a reduction in trade not only between the countries involved but also with other countries. Moreover, the impact of the sanctions on trade volume is more pronounced than the impact of war. Finally, we show that the effects of both war and sanctions persisted for several years after they ended.

Keywords

economic sanctions wars international trade former Yugoslavia 

JEL Classifications

F14 F51 C23 D74 
This is a preview of subscription content, log in to check access.

Notes

Acknowledgements

I thank two anonymous referees and the editor, Paul Wachtel, for many valuable comments that significantly improved the paper. I am grateful to José de Sousa, Octavio Escobar and the participants at ETSG Conference in Copenhagen for helpful comments. The usual disclaimer applies.

References

  1. Acemoglu, D and Yared, P . 2010: Political limits to globalization. American Economic Review 100 (2): 83–88.CrossRefGoogle Scholar
  2. Anderson, J and Marcouiller, D . 2002: Insecurity and the pattern of trade. Review of Economics and Statistics 84 (2): 342–352.CrossRefGoogle Scholar
  3. Anderson, JE and Van Wincoop, E . 2003: Gravity with gravitas: A solution to the border effect puzzle. American Economic Review 93 (1): 170–192.CrossRefGoogle Scholar
  4. Anderton, CH and Carter, JR . 2001: The impact of war on trade: An interrupted time-series study. Journal of Peace Research 38 (4): 445–457.CrossRefGoogle Scholar
  5. Arad, RW and Hillman, AL . 1979: Embargo threat, learning and departure from comparative advantage. Journal of International Economics 9 (2): 265–275.CrossRefGoogle Scholar
  6. Arellano, M and Bond, S . 1991: Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58 (2): 277–297.CrossRefGoogle Scholar
  7. Askari, H, Forrer, J, Teegen, H and Yang, J . 2004: U.S. economic sanctions: An empirical study. International Trade Journal 18 (1): 23–62.CrossRefGoogle Scholar
  8. Azam, JP and Saadi-Sedik, T . 2004: Aid versus sanctions for taming oppresors: Theory and case study of the Iraqi Kurds. Defense and Peace Economics 15 (4): 343–364.CrossRefGoogle Scholar
  9. Babetskaia-Kukharchuk, O and Maurel, M . 2004: Russia's accession to the WTO: The potential for trade increase. Journal of Comparative Economics 32 (4): 680–699.CrossRefGoogle Scholar
  10. Baier, SL and Bergstrand, JH . 2007: Do free trade agreements actually increase members’ international trade? Journal of International Economics 71 (1): 72–95.CrossRefGoogle Scholar
  11. Barbieri, K and Levy, JS . 1999: Sleeping with the enemy: The impact of war on trade. Journal of Peace Research 36 (4): 463–479.CrossRefGoogle Scholar
  12. Bazler-Madzar, M . 2000: Ekonomska integracija na teritoriji bivse Jugoslavije: na putu ka evropskoj integraciji. Ekonomski Institut: Beograd, p. 240.Google Scholar
  13. Bhagwati, JN and Srinivasan, TN . 1976: Optimal trade policy and compensation under endogeneous uncertainty: The phenomenon of trade disruption. Journal of International Economics 6 (4): 317–336.CrossRefGoogle Scholar
  14. Blomberg, SB and Hess, GD . 2006: How much does violence tax trade? Review of Economics and Statistics 88 (4): 599–612.CrossRefGoogle Scholar
  15. Blundell, R and Bond, S . 1998: Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 (1): 115–143.CrossRefGoogle Scholar
  16. Bussman, M . 2010: Foreign direct investment and militarized interstate conflict. Journal of Peace Research 47 (2): 143–153.CrossRefGoogle Scholar
  17. Caruso, R . 2003: The impact of international economic sanctions on trade: An empirical analysis. Peace Economics, Peace Science and Public Policy 9 (2): 1–29.CrossRefGoogle Scholar
  18. Chang, YC, Polachek, SW and Robst, J . 2004: Conflict and trade: The relationship between geographic distance and international interactions. Journal of Socio-economics 33 (4): 491–509.CrossRefGoogle Scholar
  19. Collier, P . 1999: On the economic consequences of civil wars. Oxford Economic Papers 51 (1): 168–183.CrossRefGoogle Scholar
  20. Combes, PP, Lafourcade, M and Mayer, T . 2005: The trade creating effects of business and social networks: Evidence from France. Journal of International Economics 66 (1): 1–29.CrossRefGoogle Scholar
  21. de Groot, HLF, Linders, GJ, Rietveld, P and Subramanian, U . 2004: The institutional determinants of bilateral trade patterns. Kyklos 57 (1): 103–124.CrossRefGoogle Scholar
  22. de Sousa, J and Lamotte, O . 2007: Does political disintegration lead to trade disintegration: Evidence from transition countries. Economics of Transition 15 (4): 825–843.CrossRefGoogle Scholar
  23. Ding, W . 1991: Yugoslavia: Costs and benefits of Union and interdependence of regional economies. Comparative Economic Studies 33 (4): 1–26.CrossRefGoogle Scholar
  24. Disdier, AC and Mayer, T . 2007: Je t’aime, moi non plus: Bilateral opinions and international trade. European Journal of Political Economy 23 (4): 1140–1159.CrossRefGoogle Scholar
  25. Eaton, J and Engers, M . 1999: Sanctions: Some simple analytics. American Economic Review 89 (2): 409–414.CrossRefGoogle Scholar
  26. Egger, P . 2002: An econometric view of the estimation of gravity models and the calculation of trade potentials. World Economy 25 (2): 297–312.CrossRefGoogle Scholar
  27. Eichengreen, B and Irwin, D . 1998: The role of history in bilateral trade flows. In: Frankel, JA (ed). The Regionalisation of the World Economy. University of Chicago Press: Chicago.Google Scholar
  28. Elliott, KA and Hufbauer, GC . 1999: Same song, same refrain? Economic sanctions in the 1990's. American Economic Review 89 (2): 403–408.CrossRefGoogle Scholar
  29. Evenett, SJ . 2002: The impact of economic sanctions on South African exports. Scottish Journal of Political Economy 49 (5): 557–573.CrossRefGoogle Scholar
  30. Federal Statistical Office of the SFR of Yugoslavia. 1989: Jugoslavja 1918–1988 Statisticki Godisnjak. Federal Statistical Office of the SFRY: Belgrade.Google Scholar
  31. Federal Statistical Office of the SFR of Yugoslavia. 1990a: Statisticki Godisnjak Jugoslavije. Federal Statistical Office of the SFRY: Belgrade.Google Scholar
  32. Federal Statistical Office of the SFR of Yugoslavia. 1990b: Statistics of Foreign Trade of the SFR Yugoslavia – Year 1989. Federal Statistical Office of the SFRY: Belgrade.Google Scholar
  33. Fontagné, L, Pajot, M and Pasteels, JM . 2002: Potentiels de commerce entre économies hétérogènes: un petit mode d’emploi des modèles de gravité. Economie et Prévision 152–53 (1–2): 115–140.CrossRefGoogle Scholar
  34. Gasiorowski, M and Polachek, SW . 1982: Conflict and interdependence. Journal of Conflict Resolution 26 (4): 709–729.CrossRefGoogle Scholar
  35. Glick, R and Taylor, AM . 2010: Collateral damage: Trade disruption and the economic impact of war. Review of Economics and Statistics 92 (1): 102–127.CrossRefGoogle Scholar
  36. Gowa, J and Mansfield, E . 1993: Power politics and international trade. The American Political Science Review 87 (2): 408–420.CrossRefGoogle Scholar
  37. Gray, PH . 1986: Non competitive goods and gains of trade. International Trade Journal 1 (2): 107–128.CrossRefGoogle Scholar
  38. Guiso, L, Sapienza, P and Zingales, L . 2009: Cultural biases in economic exchange. Quarterly Journal of Economics 124 (3): 1095–1131.CrossRefGoogle Scholar
  39. Hegre, H, Oneal, JR and Russett, B . 2010: Trade does promote peace: New simultaneous estimates of the reciprocal effects of trade and conflict. Journal of Peace Research 47 (6): 763–774.CrossRefGoogle Scholar
  40. Herbst, J . 1990: War and the state in Africa. International Security 14 (4): 117–139.CrossRefGoogle Scholar
  41. Hufbauer, GC and Oegg, B . 2003: The impact of economic sanctions on U.S. trade: Andrew Rose's gravity model. International Economics Policy Brief 03-4. Institute for International Economics: Washington.Google Scholar
  42. Hufbauer, GC, Schott, JJ, Ann Elliott, K and Oegg, B . 1990: Economic Sanctions Reconsidered. Institute for International Economics: Washington.Google Scholar
  43. International Monetary Fund (IMF). 1994: International Financial Statistics. IMF: Washington DC.Google Scholar
  44. Kaempfer, WH and Lowenberg, AD . 1988: The theory of international economic sanctions: A public choice approach. American Economic Review 78 (4): 786–793.Google Scholar
  45. Kaempfer, WH and Lowenberg, AD . 2007: The political economy of economic sanctions. In: Sandler, T and Hartley, K (eds). Handbook of Defense Economics. Vol. 2, Defense in a Globalized World Elsevier: Amsterdam, The Netherlands.Google Scholar
  46. Keshk, OMG, Pollins, B and Reuveny, R . 2004: Trade still follows the flag: The primacy of politics in a simultaneous model of interdependence and armed conflict. Journal of Politics 66 (4): 1155–1179.CrossRefGoogle Scholar
  47. Kim, HM and Rousseau, D . 2005: The classical liberals were half right (or half wrong): New tests of the ‘Liberal Peace’, 1960–88. Journal of Peace Research 42 (5): 523–543.CrossRefGoogle Scholar
  48. Kimura, H and Todo, Y . 2010: Is foreign aid a vanguard of foreign direct investment? A gravity-equation approach. World Development 38 (4): 482–497.CrossRefGoogle Scholar
  49. Kinne, BJ . 2012: Multilateral trade and militarized conflict: Centrality, openness, and asymmetry in the global trade network. Journal of Politics 74 (1): 308–322.CrossRefGoogle Scholar
  50. Knight, M, Loayza, N and Villanueva, D . 1996: The peace dividend: Military spending cuts and economic growth. IMF Staff Papers 43 (1): 1–37.CrossRefGoogle Scholar
  51. Kraft, E . 1992: Evaluating regional policy in Yugoslavia. Comparative Economic Studies 34 (3–4): 11–33.CrossRefGoogle Scholar
  52. Levy, JS and Barbieri, K . 2005: Trading with the enemy during wartime. Security Studies 13 (3): 1–47.CrossRefGoogle Scholar
  53. Li, Q and Vashchilko, T . 2010: Dyadic military conflict, security alliances, and bilateral FDI flows. Journal of International Business Studies 41 (5): 759–764.CrossRefGoogle Scholar
  54. Limao, N and Venables, AJ . 2001: Infrastructure, geographical disadvantage, transport costs and trade. World Bank Economic Review 15 (3): 451–479.CrossRefGoogle Scholar
  55. Mansfield, E and Bronson, R . 1997: Alliances, preferential trading arrangements, and international trade. American Political Science Review 91 (1): 94–107.CrossRefGoogle Scholar
  56. Maoz, Z . 2009: The effects of strategic and economic interdependence on international conflict across level of analysis. American Journal of Political Science 53 (1): 223–240.CrossRefGoogle Scholar
  57. Martin, P, Mayer, T and Thoenig, M . 2008: Make trade not war? Review of Economic Studies 75 (3): 865–900.CrossRefGoogle Scholar
  58. Martin, P, Mayer, T and Thoenig, M . 2010: The geography of conflicts and free trade agreements. CEPR Discussion Paper 7740.Google Scholar
  59. Matyas, L . 1997: Proper econometric specification of the gravity model. World Economy 21 (3): 363–368.CrossRefGoogle Scholar
  60. Morrow, JD, Siverson, RM and Tabares, T . 1998: The political determinants of international trade: The major powers, 1907–90. American Political Science Review 92 (3): 649–661.CrossRefGoogle Scholar
  61. Polachek, SW . 1978: Dyadic dispute: An economic perspective. Papers of the Peace Science Society 28: 67–80.Google Scholar
  62. Polachek, SW . 1980: Conflict and trade. Journal of Conflict Resolution 24 (1): 55–78.Google Scholar
  63. Polachek, SW . 1992: Conflict and trade: An economics approach to political international interactions. In: Isard, W and Anderton, C (eds). Economics of Armies Reduction and the Peace Process. Elsevier: New York.Google Scholar
  64. Polachek, SW . 2010: Current research and future directions in peace economics: Trade gone awry. Peace Economics, Peace Science and Public Policy 16 (2); Article 4.Google Scholar
  65. Polachek, SW and Seiglie, C . 2007: Trade, peace and democracy: An analysis of dyadic dispute. In: Sandler, T and Hartley, K. (eds). Handbook of Defense Economics. Vol. 2, Defense in a Globalized World Elsevier: Amsterdam, The Netherlands.Google Scholar
  66. Pollins, BM . 1989a: Does trade follow the flag? American Political Science Review 83 (2): 465–480.CrossRefGoogle Scholar
  67. Pollins, BM . 1989b: Conflict, cooperation and commerce: The effect of international political interactions on bilateral trade flows. American Journal of Political Science 33 (3): 737–761.CrossRefGoogle Scholar
  68. Rauch, J . 2001: Business and social networks in international trade. Journal of Economic Literature 39 (4): 1177–1203.CrossRefGoogle Scholar
  69. Rauch, J and Trindade, V . 2002: Ethnic Chinese networks in international trade. Review of Economics and Statistics 84 (1): 116–130.CrossRefGoogle Scholar
  70. Redding, S and Venables, AJ . 2004: Economic geography and international inequality. Journal of International Economics 62 (1): 53–82.CrossRefGoogle Scholar
  71. Reuveny, R and Kang, H . 1996: International trade, political conflict/cooperation and Granger causality. American Journal of Political Science 40 (3): 943–970.CrossRefGoogle Scholar
  72. Reuveny, R and Kang, H . 2003: A simultaneous-equations model of trade, conflict and cooperation. Review of International Economics 11 (2): 279–295.CrossRefGoogle Scholar
  73. Roodman, D . 2009: How to xtabond2: An introduction to difference and system GMM in Stata. STATA Journal 9 (1): 86–136.Google Scholar
  74. Rose, A . 2005: Which international institutions promote international trade? Review of International Economics 13 (4): 682–698.CrossRefGoogle Scholar
  75. Rose, A . 2007: The foreign service and foreign trade: Embassies as export promotion. The World Economy 30 (1): 22–38.CrossRefGoogle Scholar
  76. Slavov, ST . 2007: Innocent or not-so-innocent bystanders: Evidence from the gravity model of international trade about the effects of UN sanctions on neighbour countries. The World Economy 30 (11): 1701–1725.CrossRefGoogle Scholar
  77. Van Bergeijk, P . 1989: Success and failure of economic sanctions. Kyklos 42 (3): 385–404.CrossRefGoogle Scholar
  78. Vicard, V . 2012: Trade, conflict, and political integration: Explaining the heterogeneity of regional trade agreements. European Economic Review 56 (1): 54–71.CrossRefGoogle Scholar

Copyright information

© Association for Comparative Economics 2012

Authors and Affiliations

  • Olivier Lamotte
    • 1
  1. 1.ESG Management SchoolParisFrance

Personalised recommendations