Neutral trade in time of war: The case of Sweden,1838–1960

Abstract

It is an established view that war aggravates economic growth due to the direct costs of war, and to the indirect costs incurred from naval warfare and economic blockades. In this article, however, we suggest that non-belligerent countries with access to open trade channels could maintain or expand their trade, even when world trade had declined. As a result, in addition to the advantages of evading the costs of war, non-belligerent countries may have experienced gains from trade during war periods. This contention is based on an examination of the wartime trade of non-belligerent Sweden during four European wars, c.1838–1960. We use interrupted time series analysis to estimate the impact of the wars on Swedish trade and real GDP growth, and we also measure the relative impact of the wars by comparing the Swedish experience to those of the belligerent countries.