Spoils of War: The Economic Consequences of the Great War in Central Europe
Grant: ERC Starting Grant, €1.49 million
Principal Investigator: Prof. Tamás Vonyó
Period: 2019-2024
The Economic Consequences of the Great War in Central Europe
SpoilsofWAR was a collaborative research project in economic and business history awarded an ERC Horizon 2020 Starting Grant in 2018. It was hosted by the Dondena Center between 2019 and 2025. We studied economic development and industrialization in Central Europe in the late 19th and early 20th century, examining the developmental consequences of the Habsburg Empire and its disintegration after World War I.
About Us
Austria-Hungary captivated generations of economic historians, for whom it promoted modern industries, modern banks and international trade. Recent comparative research revised these seminal assessments. Central Europe was economically weakly integrated, relatively backward and continued to fall behind Western industrial nations until World War I. This development gap delayed industrialization and the rise of big business. The economic impact of political disintegration in Central Europe concerned prominent contemporaries between the world wars and has long been debated by historians. These debates reached no firm conclusions. New scholarship relied on old accounts, outdated analytical approaches could not distinguish the confounding effects of changing borders, wartime disruptions and historical conditions, and a predominantly macroeconomic approach overlooked the differential impact of wartime and post-war transformations between regions, industries and individual firms.
SpoilsofWAR aimed at filling this knowledge gap. Based on a herculean data collection effort in which we amassed regional, local and firm-level statistics from historical sources, we used modern empirical tools to assess regional economic development and the legacies of complex border effects. We examined the impact of German immigration on agricultural advancement in Hungary and of colonial railways in Bosnia-Herzegovina, the level and spatial concentration manufacturing in the Habsburg Empire before World War I. We explored the persistent socio-economics legacies of the Habsburg Military Border and economic integration within changing borders in Southeast Europe. We traced income inequality in both national and comparative contexts. Finally, we built a novel and comprehensive database of industrial war contractors to assess industrial concentration and mobilization in Austria-Hungary during the Great War and to examine the growth of big industry in Central Europe from the 1900s to the 1930s.
Team
Tamás Vonyó, Principal Investigator
Associate Professor of Economic History, Department of Social and Political Sciences
Tamás Vonyó received his PhD from the University of Oxford in 2011. He held positions at the London School of Economics and the Groningen Growth and Development Centre. He is research fellow of the Centre for Economic Policy Research and trustee of the European Historical Economics Society. His research has focused on the history of modern economic growth and the economic history of the world wars, especially in the context of Central and Eastern Europe. He is author of The Economic Consequences of the War: West Germany’s Growth Miracle after 1945, published by Cambridge University Press.
Stefan Nikolic, PhD in Economics
Lecturer (assistant professor) in Economics, Loughborough University
Stefan Nikolic was postdoctoral fellow of SpoilsofWAR at the Dondena Center from 2019 and 2023. He received his PhD from the University of York in 2017 and subsequently held a research position at the Groningen Growth and Development Centre. He is codirector of a new international initiative, The Centre for South-East European Economic History. His contributions to historical economic geography examine spatial inequalities in economic performance. His research has been published in leading journals in economic history.
Bogdan Popescu, PhD in Political Science
Assistant professor (tenured) in Political Science at Political Science, John Cabot University
Bogdan Popescu was postdoctoral fellow of SpoilsofWAR at the Dondena Center from 2019 and 2022. He held another postdoc position at Princeton University and a departmental lectureship at the University of Oxford. He received his PhD from the University of Chicago in 2018. His research has bridged a range of topics in comparative politics and historical political economy, particularly the developmental legacies of empires in Central and Southeast Europe. He is author to Imperial Borderlands: Institutions and Legacies of the Habsburg Military Frontier, published by Cambridge University Press. His new book, Islam, Sultans, and the Printing Press: How Absence of the Printed Word Limited Development re-examines the familiar role of religion in underdevelopment.
Mária Hidvégi, PhD in History
Postdoctoral Fellow, Dondena Center, Bocconi University
Mária Hidvégi received her PhD in Comparative Cultural and Social History from the University of Leipzig in 2015. She subsequently held research fellowships at the University of Konstanz and Humboldt University in Berlin. She joined SpoilsofWAR in 2022. Her research has focused on the development of leading firms and cartels in the electrotechnical and machine building industry and the history of electrification in Central Europe. She is author of Anschluss an den Weltmarkt: Ungarns elektrotechnische Leitunternehmen 1867–1949, published by Vandenhoeck & Ruprecht.
Our Research
Border Effects
B. Popescu (2023), Imperial borderlands: institutions and legacies of the Habsburg Military Frontier, Cambridge Studies in Economic History. Cambridge University Press.
Extractive institutions are key features of colonialism whereby historical states exploited local populations for the benefit of the former. Imperial Borderlands reveals that extractive institutions are not monolithic but entail a variety of dimensions that can directly impact development. The book proposes a conceptual framework to assess the ambivalent effect of extractive institutions, which depends on the three factors: investment, property rights, and violence. The worst outcomes for development are cases of extractivism with low state investment in infrastructure, high transformation of local society by removing property rights, and high physical coercion. To substantiate these claims, Imperial Borderlands employs an interdisciplinary approach that integrates historical narrative with econometric analysis to trace the evolution of military colonialism, an institution that the Austrian Habsburgs created in the 16th century and maintained for another two hundred years in the extensive southern border of their vast territorial empire.
B. Popescu (2023), The developmental legacies of border buffer zones: the case of military colonialism, Journal of Historical Political Economy 3 (1): 31-63.
How do countries in conflict manage their borders and what are the long-term implications? Little literature focuses on the developmental legacies of military buffer zones. The Habsburg Empire maintained for centuries military colonies along its southern border, where local populations provided military service in exchange for land. Using a geographic regression discontinuity design, I show that municipalities in modern-day Croatia within the former military colony have had less investment in infrastructure, lower interpersonal trust, and weaker trust in formal institutions. I argue that the intensity of imperial investment, the transformation and/or reorganization of local societies, and labor market inflexibility are key determinants in shaping these developmental legacies both in the short and long-run.
S. Nikolic (with D. Chilosi), Vanishing borders: ethnicity and trade costs at the origin of the Yugoslav market, Journal of Economic History, accepted and forthcoming.
This article exploits the creation of a paradigmatic multi-ethnic state, Yugoslavia, to examine whether the effect of ethnic identity on trade costs persists when borders change. We rely on a panel of over 550,000 inter-urban price gaps spanning the area of Yugoslavia before and after Yugoslav unification of 1918. Controlling for transport costs and import tariffs, we find a large but transitory border effect. Ethno-religious differences initially significantly increased trade costs, but their negative influence vanished over time, too. The decline began about twelve years before unification, involved also city-pairs that were not divided by the border, and was particularly marked in places where Yugoslav unification enjoyed strong support. These patterns support the hypothesis that Yugoslav nationalism fostered trust across ethno-religious boundaries. Our results show that political movements can change patterns of ethnic identification of traders swiftly.
Regional Development
S. Nikolic & T. Vonyó (with M. Blum), Immigration and development: German agricultural settlers in the Kingdom of Hungary, Journal of Economic History, accepted and forthcoming.
After prolonged warfare between the Habsburg and Ottoman Empires, German-speaking immigrants helped repopulate newly conquered Hungarian lands during the 18th century. Exploiting spatial variation across more than four thousand villages in regions subject to resettlement and German immigration, we find that proximity to 18th-century German settlements predicted higher farm productivity until the early 20th century. Consistent with historical accounts, we explain this persistent productivity effect with the higher human capital and intensive agrarian specialization of German farmers. Development gains from German immigration diffused slowly and only locally, driven by the limited geographical dispersion of Germans, not by inter-ethnic knowledge transmission.
S. Nikolic (with M. Neubert), Why railways fail: colonial railways and economic development in Habsburg Bosnia-Herzegovina, revision requested in Journal of Development Economics.
Are railways always a harbinger of prosperity? We examine the economic effects of railways in Bosnia-Herzegovina under Habsburg colonial rule. Our novel dataset consistently tracks the non-agrarian population share of over 4,500 settlements in Habsburg Bosnia in 1885, 1895, and 1910, based on census records. Applying the inconsequential units approach, with least cost paths as our instrumental variable,we estimate the effect of railway access on structural transformation. Normal-gauge railways deindustrialized Bosnian settlements by exposing local crafts to imperial competition. Narrow-gauge railways accelerated structural transformation temporarily, primarily by attracting foreigners. Narrow-gauge railways had a more sustained impact on structural transformation in settlements endowed with human capital and secured by law enforcement. Our findings suggest colonial railways are no silver bullet for economic development; transport infrastructure requires development prerequisites to have a lasting positive effect.
S. Nikolic & T. Vonyó, Industrialization in the Habsburg Empire: a spatial analysis, work in progress.
Geography featured prominently in the history of industrialization. Economic historians examined the spread of modern industry across countries and its location determinants. We use detailed statistics from occupational and business censuses to construct accurate measures for both the level of industrialization and its spatial concentration in Austria-Hungary before World War I. Differentiating employment in craft and factory industry, we show that modern manufacturing remained a very small sector of the Habsburg economy. We map industry location in 50 regions across 13 branches of manufacturing. Spatial concentration differed dramatically between industries. We find strong concentration and regional specialization in factory industry. The survival of large craft industries, not the Industrial Revolution, diffused industrial employment across the empire. In spatially concentrated industries, location determinants reflected local endowments and path dependency but not market access, which explains the lack of spatial diffusion.
Income Inequality
S. Nikolic, F. Novokmet & P. Larysz (2024), Income inequality in Eastern Europe: Bulgaria and Czechoslovakia in the twentieth century, Explorations in Economic History, 94: 101594.
This article provides novel estimates of long-term income inequality in Bulgaria and Czech Lands/Czechoslovakia in the twentieth century. Relying on newly constructed datasets and the social tables approach, we measure inequality between salient social strata. We find that Czechoslovakia was significantly more unequal than Bulgaria before 1945. Inequality converged to similarly low levels under socialism. Decomposition analysis by social classes reveals that different levels of inequality in the first half of the century were principally driven by higher within social-class inequality in Czechoslovakia, owing to a more stratified industrial society, whereas a low dispersion within the dominant agricultural sector held down the within social-class component in Bulgaria. A dramatic fall in total inequality after 1945 was a result of the social revolution that encompassed the virtual disappearance of between social-class inequality and a marked reduction in within social-class inequality. Our findings point to the critical role of institutional and political factors in driving inequality in Eastern Europe throughout the twentieth century.
S. Nikolic (2025), Spatial inequality in prices and wages within a late-developing economy: Serbia, 1863-1910, Economic History Review, 78 (1): 207-234.
Serbia emerged as a small independent nation-state in the economic periphery of nineteenth-century Europe. This article leverages uniquely abundant town-level data to examine spatial inequality in prices and wages within this late-developing economy. I first build a new dataset on prices of traded and household goods, and wages of skilled and unskilled workers for a panel of 42 urban settlements in Serbia in the period from 1863 to 1910. I apply the welfare ratio approach to calculate real wages of day labourers and masons. Second, I find strong spatial convergence in grain prices and costs of living, but divergence in wages, both nominal and real. Lastly, I investigate the determinants of price convergence and wage divergence with panel-data models. The results suggest that falling transport costs decreased price gaps between locations, whereas rising population differences increased inter-urban wage gaps.
Business History of Industrialization
M. Hidvégi & T. Vonyó (with M. Balaban), Survival through globalization: innovation, internationalization, and the endurance of big business in Central Europe, Business History, accepted and forthcoming
We present a comparative case study of two richly documented manufacturing firms in Central Europe to examine how economic nationalism and rising trade barriers shaped their global business strategies in the interwar period and how they managed to re-establish their global presence after 1945. From a provincial shoemaker in Moravia, Bata grew into the world’s largest footwear exporter by the 1930s with a global production and sales network that continued to grow until the 1980s. Tungsram was the seminal producer of lightbulbs and radio valves in Hungary and founding member of international cartels. It remained a prominent exporter to both socialist and market economies during the Cold War. Both cases highlight technological and organizational innovation and strategic-capabilities accumulation as key determinants of successful internationalization.
T. Vonyó, Spoils of war: military contractors of the Habsburg Empire in World War I, work in progress.
The economic history of the world wars has focused mainly on national economies, much less on the role of enterprise in the war economy. Historians had greater interest in how the state managed the economy in wartime than how wars changed the economy. This article exploits two inventories of war contractors by the Imperial War Ministry of Austria-Hungary in World War I to construct an original database of almost four thousand firms in mining and manufacturing disaggregated by region and industry, documenting the size of their workforce and of their war contracts. I examine the scale and degree of war mobilization across industries, how the war enhanced the spatial concentration of industry, and how much the war economy benefited large firms.
T. Vonyó (with A. Colli) Eds., Globalizing firms in a deglobalizing world: industrial success in Central Europe between the world wars, book proposal under review in Routledge International Studies in Business History.
- Chapter contributions by T. Vonyó and M. Hidvégi (2)
- Draft chapters discussed at book conference in Milan, October 2024.
Spoils of WAR Conferences
17th September 2021
Book conference
Imperial Borderlands: Institutions and Legacies of the Habsburg Military Frontier by Bogdan G. Popescu
The online conference hosted by the Dondena Center presented and discussed the draft manuscript of the first monograph of our project written by Bogdan G. Popescu. Discussants included prominent economic historians and political scientists. The book has been published in 2023 in the Cambridge Studies of Economic History by Cambridge University Press.
28-29th June 2024
Spoils of WAR & WEast Conference
The New Economic History of Empires in Eastern Europe
We hosted a two-day conference in collaboration with WEast, the Eastern European Economic History Network, which Stefan Nikolic and Tamás Vonyó have co-directed and which have included important collaborators of our project. The conference showcased our work and demonstrated our contributions to recent research on the quantitative economic history of empires in East and Southeast Europe. The conference served to convene a session at the forthcoming World Economic History Congress in 2025.
28-29th June 2024
Book Conference
The conference hosted by the Dondena Center presented and discussed the concept and draft chapters of a collective volume co-edited by Andrea Colli and Tamás Vonyó from Bocconi and with contributions from leading business historians of Central Europe. We invited prominent discussants in business and global history. The book proposal is under review at Routledge for publication in Routledge International Studies in Business History.
Congress sessions
In addition to our project conferences, SpoilsofWAR organised sessions at international congresses in social, economic, and business history. We convened and chaired these sessions, which presented our research together with the work of our collaborators.
25-28th March 2021
European Social Science History Conference (Online)
Session: The Great War and the Economies of East Central Europe
17-19th June 2022
European Historical Economics Society Conference, University of Groningen
Session: The Spatial Analysis of Social and Economic Development in the Habsburg Empire
11-13th July 2024
European Business History Association Conference, Nova Business School, Lisbon
Session: Business History with Big Data – Central Europe between the World Wars
28-31st July 2025
World Economic History Congress, University of Lund
Session: The New Economic History of Empires in Eastern Europe
The comprehensive database complied from contemporary statistical sources documents grain prices and trade costs, including tariffs and transport costs, in a panel of cities in the territory of interwar Yugoslavia between 1889 and 1928. In future work, please cite the following article:
Chilosi, D. and N. Nikolic (2025), Vanishing borders: ethnicity and trade costs at the origin of the Yugoslav market, Journal of Economic History.
- Industrialization in the Habsburg lands
The database will be available after publication of our scientific article examining the level and spatial concentration of industrialization in the Habsburg Empire before the First World War. It documents the occupational structure of the active labour force in all sectors of the economy and 13 industries within manufacturing using two geographical classifications: (I) Austrian crown lands and Hungarian country parts, and (II) regional champers of commerce. The database will include maps generated with GIS applications demonstrating the regional concentration of manufacturing industries, differentiating between craft and factory industry.
- Military contractors of the Habsburg Empire
The database will be available after publication of our scientific article examining war mobilization of industries in Austria-Hungary, how World War I enhanced the spatial concentration of industry, and how much the war economy benefited large firms. Using two confidential inventories of military contractors by the Imperial War Ministry of Austria-Hungary we document the size of the workforce and the value of war contracts for almost four thousand firms in mining and manufacturing. The data is disaggregated by industry and region.
- Big industry in Central Europe
The database is in progress. Drawing on our primary database of military contractors, we examine approximately 200 firms: the largest industrial contractors of Austria-Hungary in the Great War with more than one thousand employed personnel. We document the development of these enterprises in the benchmark years 1914, 1916, 1920, 1925 and 1930. We collect data from a panoply of primary sources on the changing names and legal forms of companies, mergers & acquisitions, directors and board members, the main creditor banks, the main industry, headquarters & operative locations.