Once an Enemy, Forever an Enemy? The Long-Run Impact of the Japanese Invasion of China from 1937 to 1945 on Trade and Investment

Yi Che, Julan Du, Yi Lu, Zhigang Tao
2011 Social Science Research Network  
We are living in an increasingly globalized world yet with constant and endless con ‡icts among countries. While studies have uncovered the impacts of various economic factors and policy regimes on trade and investment, a much less understood issue is whether con ‡icts among countries have any, especially long-lasting, impacts on crossborder trade and investment. In this paper, we exploit one of the most important con ‡icts of the 20th century between what are currently the world's second and
more » ... orld's second and third largest economies, the Japanese invasion of China from 1937 to 1945, to investigate its long-run impact on contemporary trade and investment between the two countries. We ...nd that Chinese regions that su¤ered more severe damage in the Japanese invasion are both less likely to trade with and trade less with Japan. Consistently, we also ...nd that Japanese multinationals are less likely to invest in Chinese regions that su¤ered greater numbers of casualties during the Japanese invasion. Our study shows that historical animosity still matters for international trade and investment, despite the trend toward a ‡at world.
doi:10.2139/ssrn.2057444 fatcat:zbn2hqjm3zbypoh42zcim4pcia