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

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  • 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
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    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).

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    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

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