Atlantic Trade and Conflict in Europe

Abstract We use over 200 years of conflict and wheat price data to provide the first quantitative evidence that Atlantic trade reduced conflict in Europe. While other determinants of intra-European conflict during the Early to Late Modern period have been proposed, the role of Atlantic trade has not been previously explored due to a lack of historical trade data. We overcome this constraint by using wheat prices to calculate time-varying measures of price pass-through between Europe and the New World, which we use as a proxy for Atlantic trade. To identify the causal effects of Atlantic trade, we exploit exogenous changes in wind patterns and tropical cyclone activity over the Atlantic Ocean to instrument trade. Our results suggest that a one-standard-deviation increase in Atlantic trade resulted in a 0.157-standard-deviation decrease in intra-European conflict onset. We also find empirical support for Atlantic trade increasing real wages and reducing military sizes in Europe, which is consistent with the idea that the possibility of forgone Atlantic trade acted as a deterrent to conflict.