Working Paper: CEPR ID: DP6951
Authors: Keith Head; Thierry Mayer; John Ries
Abstract: The majority of independent nations today were part of empires in 1945. Using bilateral trade data from 1948 to 2006, we examine the effect of independence on post-colonial trade. On average, there is little short run effect of trade with the colonizer (metropole). However, after three decades trade declines more than 60%. We also find that trade between former colonies of the same empire erodes as much as trade with the metropole, whereas trade with third countries exhibits small and unsystematic changes after independence. Hostile separations lead to larger and more immediate reductions. Trade deterioration over extended time periods suggests the depreciation of some form of trading capital such as business networks or institutions.
Keywords: colonies; gravity; trade
JEL Codes: F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Independence (F54) | Trade erosion (F14) |
| Deterioration of trading capital (G32) | Trade erosion (F14) |
| Independence (F54) | Deterioration of trading capital (G32) |
| Hostile separations (J12) | Larger reductions in trade (F19) |
| Amicable separations (J12) | Smaller reductions in trade (F19) |
| Decline in French expatriates (F22) | Trade erosion (F14) |
| Independence (F54) | Decline in French expatriates (F22) |
| Trade between former colonies of the same empire (F54) | Greater decline in trade erosion (F19) |