March 15: Henry Stemmler (Göttingen University)

Monday, March 15 2021

Henry Stemmler (Göttingen University), “Your Pain, My Gain? On the Trade Diversion Effects from Civil Conflicts” with Tobias Korn


This paper investigates the trade diversion effects of national conflicts. We hypothesize that when civil war depresses one country’s exports, the country’s former trading partners increase imports from third countries as compensation. To investigate this hypothesis empirically, we create an indicator variable which translates the triadic relationship between a conflict country and an exporter-importer pair into a dyadic relationship estimable via standard gravity equations. We find robust evidence from both General Equilibrium estimations based on recent case studies as well as Partial Equilibrium estimates for the 1988{2015 period that civil wars divert international trade flows. We further provide evidence that these trade diversion effects persist after civil conflict is resolved, and that they are most prominent in the minerals sector. Our findings add to the discussion of the long-run economic costs of civil conflict.