Shooting down trade: Firm-level effects of embargoes

Ugur Aytun, Julian Hinz and Cem Ozguzel ()
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Cem Ozguzel: Centre d'Economie de la Sorbonne, Paris School of Economics, Paris, France

No 2404, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: In November 2015, Turkey's unexpected downing of a Russian military jet in Syria prompted Russia to impose a swift and comprehensive embargo on specific Turkish exports. This study leverages this quasi-natural experiment to estimate both the immediate and longer-term effects of the imposition and subsequent lifting of these sanctions. Utilizing administrative data encompassing all Turkish exporters, we first examine the impact on trade at the firm level, assessing the direct effects of the embargo, the redirection of trade to alternative markets, and the circumvention through other products. Second, we investigate broader repercussions on domestic operations, including firms' sales, procurement, and employment. Our findings show that while the embargo caused immediate and substantial declines in exports of affected products to Russia, firms partially mitigated these losses through trade diversion. Although relative trade patterns normalized post-sanctions, absolute trade values remained subdued. The analysis reveals that affected firms experienced declines in domestic sales and supplier relationships, with temporary disruptions in employment. However, most negative effects dissipated following the embargo's removal, except for some persistent reductions in procurement and supplier links. These results contribute to the understanding of sanctions' broader economic implications and the resilience of firms facing trade disruption.

Keywords: Sanctions; Embargoes; Firm-level Effects; Gravity (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 F51 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2024-11, Revised 2024-11
New Economics Papers: this item is included in nep-ara, nep-cis, nep-eur and nep-int
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https://erc.metu.edu.tr/en/system/files/menu/series24/2404.pdf First version, 2024 (application/pdf)

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Working Paper: Shooting down trade: Firm-level effects of embargoes (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:2404

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