Working Paper: CEPR ID: DP14206
Authors: Reshad Ahsan; Laura Panza; Yong Song
Abstract: We use over 200 years of conflict and wheat price data to provide the first quantitative evidence that Atlantic trade contributed to Europe’s pacification between 1640 and 1850. While the decline in conflict in Europe during this period has been well documented, the role of Atlantic trade has not been previously explored due to a lack of historical trade data. We overcome this constraint by using wheat prices to calculatetime-varying measures of price pass-through between Europe and the New World, which we use as a proxy for Atlantic trade. To identify the causal effects of Atlantic trade, we exploit exogenous changes in wind patterns and tropical cyclone activity over the Atlantic Ocean to instrument trade. Our results suggest that the growth in Atlantic trade between the mid-17th to the early 19th century lowered the likelihoodof intra-European conflict onset by 19.22 percent from the baseline onset probability of 2.30 percent. We find empirical support for two channels driving our results: first, Atlantic trade led to an increase in real wages and a reduction in military sizes inEurope. Second, we show that the possibility of forgone Atlantic trade acted as a deterrent to conflict.
Keywords: conflict; atlantic trade; international relations
JEL Codes: D74; N43; F51; F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Atlantic trade (F19) | conflict onset (D74) |
| Atlantic trade (F19) | real wages in Europe (N93) |
| real wages in Europe (N93) | cost of militarization (H56) |
| cost of militarization (H56) | conflict onset (D74) |
| forgone trade (F19) | conflict onset (D74) |
| Atlantic trade (F19) | military sizes (H56) |
| trade links to New World (F19) | conflict onset (D74) |