The economic consequences of geopolitical fragmentation: Evidence from the Cold War

Abstract

This article constructs new data on trade flows involving socialist economies, missing from standard datasets, and shows that trade barriers between Eastern and Western Europe were much larger and more volatile than previously available information suggest. Using primary historical sources, we reconstruct bilateral and domestic trade flows for Eastern European countries, recovering a complete trade matrix for the Cold War period. These data are essential to identify trade barriers in a structural gravity framework. Our estimates suggest that trade barriers between Eastern and Western Europe were large and varied substantially over time, declining during periods of easing tensions and rising with renewed confrontation. The results provide a benchmark for how trade barriers vary with geopolitical tensions.

Rodolfo G. Campos

Economist

My research interests include macroeconomics, social insurance, and international economics.