The economic costs of war by other means

Sonali Chowdhry, Gabriel Felbermayr, Julian Hinz, Katrin Kamin, Anna-Katharina Jacobs and Hendrik Mahlkow

No 147, Kiel Policy Brief from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Military interventions and economic sanctions are increasingly seen as strategic substitutes for achieving national and global security objectives, both impose economic costs. We quantify the lower bound of the costs of sanctions using a gravity model of international trade and a general equilibrium simulation model. We find that sanctions amount to a loss in GDP of about 34 billion USD in 2019/2020 for the sanctioning NATO countries collectively, but the costs of sanctions are very unevenly distributed. No other country contributes as much as Germany (8.1 billion USD), while the costs for the US amount to 2.6 billion USD. Accounting for sanctions, countries' contributions to global security as a share of GDP are closer to the 2% NATO target than a narrow focus on military expenditure alone would suggest. Hence, there is less free-riding than some observers suspect.

Keywords: sanctions; NATO; trade policy; global security; Sanktionen; NATO; Handelspolitik; globale Sicherheit (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkpb:147

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