 Economic sanctions and domestic diversionAnirudh Shingal Economics Letters, 2024, vol. 244, issue C Abstract: The existing sanctions-impact literature has documented diversion effects favouring third countries for both merchandise trade and investment, but it has not considered sanctions diverting trade towards the domestic economy in sender and target countries. We contribute by using the Global Sanctions Database (Felbermayr et al. 2020a,b) in a structural gravity framework to provide evidence for domestic trade diversion. Our results show that the adverse effects of different sanction-types on senders’ bilateral manufacturing imports get accentuated (and any positive effects get neutralized) when the underlying data include internal trade flows, providing evidence for diversion towards domestic producers in sanctioning countries. A similar finding is observed on the bilateral export side suggesting that sanctions also divert trade towards domestic consumption. Moreover, we find sanctions to reduce senders’ cross-border imports when domestic suppliers in the sanctioning country are more competitive, thereby supporting the political economy of sanctions-imposition. Keywords: Sanctions; Trade; Domestic diversion; Political economy; GSDB; Gravity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s016517652400483x DOI: 10.1016/j.econlet.2024.111999 Access Statistics for this article Economics Letters is currently edited by Economics Letters Editorial Office More articles in Economics Letters from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.