Identifying and quantifying the extraterritorial effects of sanctions

We identify the extraterritorial effects of trade sanctions and provide quantitative evidence that they are strong. Additionally, we show that the estimates of the primary effects may be significantly biased if the aforementioned extraterritorial effects are not taken into account. In the context of...

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Bibliographic Details
Published inEuropean economic review Vol. 170; p. 104888
Main Authors Kwon, Ohyun, Syropoulos, Constantinos, Yotov, Yoto V.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.11.2024
Subjects
Economic sanctions
Extraterritorial effects
Primary effects
Trade
Welfare
Trade
F51
Primary effects
Welfare
Q17
F14
Extraterritorial effects
Economic sanctions
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Summary:We identify the extraterritorial effects of trade sanctions and provide quantitative evidence that they are strong. Additionally, we show that the estimates of the primary effects may be significantly biased if the aforementioned extraterritorial effects are not taken into account. In the context of the U.S. embargo on Cuba, we confirm the presence of large and significant extraterritorial effects that vary across Cuba’s trade partners — most non-sanctioning states trade less with Cuba while its economic allies and states in close proximity to it trade more. Moreover, our complementary general-equilibrium analysis establishes that the U.S.’s sanctions have inflicted large welfare losses on Cuba but their effects on the rest of the world were small. As such, our analysis sheds new light on the significance (in terms of effectiveness) of extraterritorial sanctions and suggests that the motives for the opposition of third countries to such sanctions may be more political and legal than economic.
ISSN:0014-2921
DOI:10.1016/j.euroecorev.2024.104888