The Effects of Economic Sanctions on the Informal Economy
Ioana M. Petrescu ()
Additional contact information
Ioana M. Petrescu: National University of Political Studies and Public Administration
Management Dynamics in the Knowledge Economy Journal, 2016, vol. 4, issue 4, 623-648
Countries often use economic sanctions to coerce other countries to change certain policies of which they do not approve. However, if sanctioned countries smuggle goods over the border, use informal financial intermediaries, and develop black markets to trade sanctioned goods, sanctions end up having a smaller impact, sanctioned countries have little incentive to modify their policies, and sanctions are more likely to fail. This paper is the first study to test empirically whether sanctions affect informality. I compile data from different studies about the size of the informal market for 147 countries over 46 years. I use these data to analyze the relationship between the size of the informal market adjusted by the size of the population and economic sanctions. I also estimate at the impact of economic sanctions on other activities associated with informal activities. I find that informal markets increase when a country is being sanctioned and the effects are larger when the economic sanction has strong international support. I also find that the type of sanction, trade or financial, is not an important determinant of the informal market size and that sanctions also lead to increases in robbery rates and corruption.
Keywords: shadow economy; economic sanctions; crime. (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nup:jrmdke:v:4:y:2016:i:4:p:623-648
Access Statistics for this article
Management Dynamics in the Knowledge Economy Journal is currently edited by Contantin BRATIANU, Florina PINZARU and Alexandra ZBUCHEA
More articles in Management Dynamics in the Knowledge Economy Journal from College of Management, National University of Political Studies and Public Administration Contact information at EDIRC.
Bibliographic data for series maintained by Cristian-Mihai VIDU ().