Shooting Down Trade

Ugur Aytun and Cem Ozguzel

No 1482, Working Papers from Economic Research Forum

Abstract: On 24 November 2015, Turkish military shot down a Russian fighter jet near the Syrian-Turkey border after it violated Turkish airspace for about 17 seconds. Russia retaliated by imposing an embargo on 17 agricultural HS-6 level products from Turkey that would be effective for 22 months. We exploit this natural experiment to evaluate the impact of sanctions on Turkish exports and exporters. Using restrictive customs and firm-level data in a triple difference framework, we estimate the effect of these sanctions on the exports towards Russia, for embargoed and non-embargoed products. We estimate a total trade loss of $3.25bn for Turkish exports, 65% of which stemming from non-embargoed products. We investigate the underlying mechanism through firm-level analysis. First, we find that number of firms that trade with Russia and export volumes decreased dramatically. Second, firms re-routed their exports to bordering countries to circumvent the sanctions. Finally, we find that medium and large firms managed to adjust to the crisis while small firms suffered the main effects of the embargo.

Pages: 46
Date: 2021-08-20, Revised 2021-08-20
New Economics Papers: this item is included in nep-ara, nep-cis and nep-int
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