DP6951 The Erosion of Colonial Trade Linkages After Independence

Author(s): Keith Head, Thierry Mayer, John Ries
Publication Date: September 2008
Keyword(s): Colonies, Gravity, Trade
JEL(s): F15
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6951

The majority of independent nations today were part of empires in 1945. Using bilateral trade data from 1948 to 2006, we examine the effect of independence on post-colonial trade. On average, there is little short run effect of trade with the colonizer (metropole). However, after three decades trade declines more than 60%. We also find that trade between former colonies of the same empire erodes as much as trade with the metropole, whereas trade with third countries exhibits small and unsystematic changes after independence. Hostile separations lead to larger and more immediate reductions. Trade deterioration over extended time periods suggests the depreciation of some form of trading capital such as business networks or institutions.