American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Price of War
American Economic Review
(pp. 791–827)
Abstract
We assemble a new dataset spanning 150 years and 60 countries to study the economic toll of war. A war of average intensity is associated with an output drop of close to 10 percent in the war-site economy, while consumer prices rise by approximately 20 percent. The capital stock, total factor productivity, and equity returns all decline sharply. The economic ramifications of war are not confined to the war site. The evidence points to adverse economic outcomes in other belligerent and third-party countries if they are exposed to the war site through trade linkages or share a common border.Citation
Federle, Jonathan, André Meier, Gernot J. Müller, Willi Mutschler, and Moritz Schularick. 2026. "The Price of War." American Economic Review 116 (3): 791–827. DOI: 10.1257/aer.20241355Additional Materials
JEL Classification
- D74 Conflict; Conflict Resolution; Alliances; Revolutions
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- F43 Economic Growth of Open Economies
- F51 International Conflicts; Negotiations; Sanctions
- N40 Economic History: Government, War, Law, International Relations, and Regulation: General, International, or Comparative