Max-Stephan Schulze, London School of Economics & Political Science
The Thirty Years War led to huge population losses and ranked in terms of death rates amongst the most devastating conflicts experienced in Europe. Authors such as Wieland (1791) and Freytag (1862) claimed the war ‘threw back’ Germany’s development by more than a century. Research so far has concentrated on its demographic consequences. There are few studies that focus on the war’s economic impact (mostly the immediate effects on trade) and none that use quantitative methods in order examine this issue. This paper asks whether and to what extent the war had longer-lasting effects on economic activity and market integration, in particular. Covering the period 1550-1789, the paper draws on an extensive new dataset of local wheat prices that includes 135 markets, more than 8,000 market pairs and a total of over 600,000 observations of bilateral wheat price differentials. Our approach views non-random deviations from the law of one price as indicators of trade costs which are taken to include transport costs, costs related to incidence of warfare and location-specific costs. On average, higher trade costs should limit the scope for arbitrage and so increase the price gap between pairs of markets. War can be seen as an extreme case of increasing trade costs. Employing panel data regressions, the paper finds that (1) the Thirty Years War had a weaker direct effect on war-time price differentials than most other wars over the period (bar the wars of the 16th century); (2) the areas worst affected by population losses suffered from longer-lasting adverse effects than other areas; (3) cumulative effects, i.e. the spatial incidence of the Thirty Years War interacting with the incidence of later wars, account for the war’s observable impact reaching well into the 18th century, and (4) the Thirty Years War interrupted but did not reverse market integration.
No extended abstract or paper available
Presented in Session 79. Economics of War