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Identifying and quantifying the extraterritorial effects of sanctions

Author

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  • Kwon, Ohyun
  • Syropoulos, Constantinos
  • Yotov, Yoto V.

Abstract

We identify the extraterritorial effects of trade sanctions and provide quantitative evidence that they are strong. Additionally, we show that the estimates of the primary effects may be significantly biased if the aforementioned extraterritorial effects are not taken into account. In the context of the U.S. embargo on Cuba, we confirm the presence of large and significant extraterritorial effects that vary across Cuba’s trade partners — most non-sanctioning states trade less with Cuba while its economic allies and states in close proximity to it trade more. Moreover, our complementary general-equilibrium analysis establishes that the U.S.’s sanctions have inflicted large welfare losses on Cuba but their effects on the rest of the world were small. As such, our analysis sheds new light on the significance (in terms of effectiveness) of extraterritorial sanctions and suggests that the motives for the opposition of third countries to such sanctions may be more political and legal than economic.

Suggested Citation

  • Kwon, Ohyun & Syropoulos, Constantinos & Yotov, Yoto V., 2024. "Identifying and quantifying the extraterritorial effects of sanctions," European Economic Review, Elsevier, vol. 170(C).
  • Handle: RePEc:eee:eecrev:v:170:y:2024:i:c:s0014292124002174
    DOI: 10.1016/j.euroecorev.2024.104888
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    References listed on IDEAS

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    Cited by:

    1. Felbermayr, Gabriel & Morgan, T. Clifton & Syropoulos, Constantinos & Yotov, Yoto, 2024. "Economic Sanctions: Stylized Facts and Quantitative Evidence," School of Economics Working Paper Series 2024-12, LeBow College of Business, Drexel University.

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    More about this item

    Keywords

    Economic sanctions; Primary effects; Extraterritorial effects; Trade; Welfare;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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