Conceptual Note on Financial and Trade Sanctions against South Africa

Brian Dollery ()

Economic Analysis and Policy, 1993, vol. 23, issue 2, 179-188

Abstract: The longevity, range and well-documented nature of economic sanctions against South Africa render it especially useful for developing a generic analytical framework aimed at evaluating economic sanctions as an instrument of foreign policy. Using conventional general equilibrium analysis, it is possible to derive comparative static conclusions about the relative effects of financial and trade sanctions. In broad terms, under the small country assumption, the burden of financial sanctions resides in a decrease in national income through an income effect, whereas trade sanctions reduce national income through a mechanism involving both income and substitution effects. Moreover, for small developing economies, while the sectoral burden of financial sanctions is borne exclusively in the capital-intensive importables sector, trade sanctions place a greater proportion of the sectoral burden on the labour-intensive exportable sector.

Date: 1993
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