The multifaceted impact of international sanctions on economic freedom: Empirical insights from a cross-national analysis

This study investigates the multifaceted relationship between international sanctions and economic freedom, treating it not simply as an economic construct but as a fundamental pillar of societal well-being. Drawing upon a panel dataset of 21 countries subjected to sanctions between 2002 and 2022, we analyze the impact of sanctions — both economic and non-economic — on overall and component-level economic freedom. Methodologically, we integrate Panel-Corrected Standard Errors, Feasible Generalized Least Squares, and Partial Least Squares Structural Equation Modeling, thereby addressing issues such as heteroskedasticity, autocorrelation, and the complexity of multiple interdependent relationships. Our findings reveal a consistent negative effect of sanctions on economic freedom, although the severity and channels of impact vary according to the nature and source of the sanctions, as well as the institutional and temporal contexts. Notably, sanctions imposed by the United Nations emerge as particularly constraining for property rights and monetary freedom, while trade and financial restrictions curtail investment and market openness. At the same time, sanctioned states demonstrate varying degrees of resilience, adapting policies and seeking alternative markets to mitigate sanctions. These outcomes underline the dual nature of sanctions as powerful tools of international diplomacy that can inadvertently undermine economic freedom. By illuminating these dynamics, our study offers insights for policymakers and scholars alike, emphasizing the importance of tailoring sanctions to limit harm to economic liberties while pursuing legitimate foreign policy objectives.