IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v220y2022ics0165176522003445.html
   My bibliography  Save this article

Multinationals, global value chains, and the welfare impacts of economic sanctions

Author

Listed:
  • Du, Xiayi
  • Wang, Zi

Abstract

We quantify the welfare impacts of the recent economic sanctions against Russia using a multi-country multi-sector general equilibrium model with trade, multinational production (MP), and input–output linkages. We calibrate our model to the world with 44 economies and 34 sectors prior to the Russia–Ukraine war in 2022. Our counterfactual analysis suggests that the economic sanctions that cut trade and MP linkages between Russia and all other economies except China would decrease the real income in Russia by 11.98%. Moreover, if only trade linkages are cut, the real income in Russia would decrease by 9.55%.

Suggested Citation

  • Du, Xiayi & Wang, Zi, 2022. "Multinationals, global value chains, and the welfare impacts of economic sanctions," Economics Letters, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003445
    DOI: 10.1016/j.econlet.2022.110870
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176522003445
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2022.110870?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2024. "Economic sanctions and agricultural trade," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(4), pages 1477-1517, August.
    2. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    3. Tibor Besedeš & Stefan Goldbach & Volker Nitsch, 2017. "You’re banned! The effect of sanctions on German cross-border financial flows," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 32(90), pages 263-318.
    4. Matthieu Crozet & Julian Hinz, 2020. "Friendly fire: the trade impact of the Russia sanctions and counter-sanctions," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(101), pages 97-146.
    5. Costas Arkolakis & Natalia Ramondo & Andrés Rodríguez-Clare & Stephen Yeaple, 2018. "Innovation and Production in the Global Economy," American Economic Review, American Economic Association, vol. 108(8), pages 2128-2173, August.
    6. Gabriel Felbermayr & Hendrik Mahlkow & Alexander Sandkamp, 2023. "Cutting through the value chain: the long-run effects of decoupling the East from the West," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(1), pages 75-108, February.
    7. Wang, Zi, 2021. "Headquarters gravity: How multinationals shape international trade," Journal of International Economics, Elsevier, vol. 131(C).
    8. Wang, Zi, 2020. "Multinational production and corporate taxes: A quantitative assessment," Journal of International Economics, Elsevier, vol. 126(C).
    9. repec:wsr:wpaper:y:2022:i:196 is not listed on IDEAS
    10. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    11. Felbermayr, Gabriel & Syropoulos, Constantinos & Yalcin, Erdal & Yotov, Yoto, 2020. "On the Heterogeneous Effects of Sanctions on Trade and Welfare: Evidence from the Sanctions on Iran and a New Database," School of Economics Working Paper Series 2020-4, LeBow College of Business, Drexel University.
    12. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
    13. Gary Clyde Hufbauer & Barbara Oegg, 2003. "The Impact of Economic Sanctions on US Trade: Andrew Rose's Gravity Model," Policy Briefs PB03-04, Peterson Institute for International Economics.
    14. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simola, Heli, 2023. "What the literature says about the effects of sanctions on Russia," BOFIT Policy Briefs 8/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Raul Caruso & Maria Cipollina, 2023. "The Effect of Economic Sanctions on World Trade of Mineral Commodities. A Gravity Model Approach from 2009 to 2020," DISCE - Quaderni del Dipartimento di Politica Economica dipe0034, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    2. Bolatto, Stefano & Moramarco, Graziano, 2023. "Gains from trade and their quantification: Does sectoral disaggregation matter?," International Economics, Elsevier, vol. 174(C), pages 44-68.
    3. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    4. Bartelme, Dominick & Lan, Ting & Levchenko, Andrei A., 2024. "Specialization, market access and real income," Journal of International Economics, Elsevier, vol. 150(C).
    5. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
    6. Felbermayr, Gabriel & Syropoulos, Constantinos & Yalcin, Erdal & Yotov, Yoto, 2019. "On the Effects of Sanctions on Trade and Welfare: New Evidence Based on Structural Gravity and a New Database," School of Economics Working Paper Series 2019-3, LeBow College of Business, Drexel University.
    7. Besedes, Tibor & Kohl, Tristan & Lake, James, 2020. "Phase out tariffs, phase in trade?," Journal of International Economics, Elsevier, vol. 127(C).
    8. French, Scott, 2017. "Revealed comparative advantage: What is it good for?," Journal of International Economics, Elsevier, vol. 106(C), pages 83-103.
    9. Hoste, J. & Verboven, F., 2024. "Uncovering the Sources of Cross-border Market Segmentation: Evidence from the EU and the US," Cambridge Working Papers in Economics 2402, Faculty of Economics, University of Cambridge.
    10. Khan, Shafaat Yar & Khederlarian, Armen, 2021. "How does trade respond to anticipated tariff changes? Evidence from NAFTA," Journal of International Economics, Elsevier, vol. 133(C).
    11. Flach, Lisandra & Heiland, Inga & Larch, Mario & Steininger, Marina & Teti, Feodora A., 2023. "Quantifying the partial and general equilibrium effects of sanctions on Russia," Open Access Publications from Kiel Institute for the World Economy 302103, Kiel Institute for the World Economy (IfW Kiel).
    12. Stephen J. Redding & David E. Weinstein, 2017. "Aggregating from Micro to Macro Patterns of Trade," NBER Working Papers 24051, National Bureau of Economic Research, Inc.
    13. Yuko Imura, 2023. "Reassessing Trade Barriers with Global Production Networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 77-116, December.
    14. Liu, Chen & Ma, Xiao, 2018. "China's Export Surge and the New Margins of Trade," MPRA Paper 103970, University Library of Munich, Germany, revised Oct 2020.
    15. Lorenzo Caliendo & Robert C. Feenstra & John Romalis & Alan M. Taylor, 2015. "Tariff Reductions, Entry, and Welfare: Theory and Evidence for the Last Two Decades," NBER Working Papers 21768, National Bureau of Economic Research, Inc.
    16. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    17. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    18. Francesco Caselli & Miklós Koren & Milan Lisicky & Silvana Tenreyro, 2020. "Diversification Through Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 449-502.
    19. Swati Dhingra & Rebecca Freeman & Hanwei Huang, 2023. "The Impact of Non‐tariff Barriers on Trade and Welfare," Economica, London School of Economics and Political Science, vol. 90(357), pages 140-177, January.
    20. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2012. "The Geography of Conflicts and Regional Trade Agreements," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 1-35, October.

    More about this item

    Keywords

    Multinational firms; Global value chains; Economic sanctions;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003445. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.