a1 Assistant Professor of Economics, Department of Economics, Rutgers University, New Brunswick, New Jersey 08901. E-mail: email@example.com.
a2 Assistant Professor, Solvay Business School, Université Libre de Bruxelles, 1050 Bruxelles, Belgium. E-mail: firstname.lastname@example.org.
a3 Professor of Economics, Department of Economics, Rutgers University, New Brunswick, New Jersey 08901, and Research Associate, NBER. E-mail: email@example.com.
Occupation charges paid by France to Nazi Germany represent one of the largest international transfers and contributed significantly to the German war effort. We employ a neoclassical growth model that incorporates essential features of the occupied economy to assess the welfare costs of the policies that managed the payments to Germany. Our lower bound estimates show that occupation payments required a severe cut in consumption. A draft of labor to Germany and a reduction of real wages added to this burden. Management of the accumulated domestic debt required large budget surpluses; but post-Liberation inflation slashed the real debt.
“Ils ne nous ont rien enlevé de vive force; ils ont toujours tout acheté correctement; mais ils nous ont tout payé avec de l'argent qu'ils nous avaient volé.”
We thank participants in seminars at Cambridge University, New York University, Oxford University, Rutgers University, and the University of British Columbia and at conferences held by the AEA-ASSA, the Economic History Association, the Federal Reserve Bank of Atlanta, and the NBER. We also thank three anonymous referees for their very helpful comments.