Worth the pain? Firms’ exporting behaviour to countries under sanctions

Matthieu Crozet, Julian Hinz, Amrei Stammann and Joschka Wanner

European Economic Review, 2021, vol. 134, issue C

Abstract: How do exporting firms react to sanctions? Specifically, which firms are willing — or capable — to serve the market of a sanctioned country? We investigate this question for four sanctions episodes using monthly data on the universe of French exporting firms. We draw on recent econometric advances in the estimation of dynamic fixed effects binary choice models. We find that the introduction of new sanctions in Iran and Russia significantly lowered firm-level probabilities of serving these sanctioned markets, while the (temporary) lifting of the U.S. sanctions on Cuba and the removal of sanctions against Myanmar had no or only small trade-inducing effects, respectively. Additionally, the impact of sanctions is very heterogeneous along firm dimensions and by case particularities. Firms that depend more on trade finance instruments are more strongly affected, while prior experience in the sanctioned country considerably softens the blow of sanctions, and firms can be partly immune to the sanctions effect if they are specialized in serving “crisis countries”. Finally, we find suggestive evidence for sanctions avoidance by exporting indirectly via neighboring countries.

Keywords: Sanctions; Trade; Foreign policy; Extensive margin; Firm behaviour (search for similar items in EconPapers)
JEL-codes: F13 F14 F51 F52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: Worth the pain? Firms’ exporting behaviour to countries under sanctions (2021)
Working Paper: Worth the pain? Firms' exporting behavior to countries under sanctions (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:134:y:2021:i:c:s0014292121000362

DOI: 10.1016/j.euroecorev.2021.103683

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