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Private sanctions

Author

Listed:
  • Oliver Hart
  • David Thesmar
  • Luigi Zingales

Abstract

SUMMARYWe survey a representative sample of the US population to understand stakeholders’ desire to see their firms leave Russia after the invasion of Ukraine. Only 37% of the respondents think that leaving Russia is a pure business decision, and only 30% think that sanctions are a pure matter for the government. If a firm does not conform to the desire to leave Russia, 66% of the respondents are willing to boycott it (exit). We randomize a (hypothetical) cost of exiting the firm. This cost has a strong effect on the stated propensity to exit. This sensitivity allows us to provide a natural $ equivalent of moral motivations for exiting. We try to distinguish deontological and impact-related motives to exit, by randomizing beliefs about the impact on the firm. We find a clear effect of impact for shareholders, but not for consumers and employees. Our results continue to hold on the subsample of participants who actually donate part of their survey compensation to Ukraine. In our survey, consumers emerge as the most powerful force to control the morality of firms. We discuss the geopolitical and economic implications of a world where private corporations can discontinue profitable business relationships for moral or political reasons.

Suggested Citation

  • Oliver Hart & David Thesmar & Luigi Zingales, 2024. "Private sanctions," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 39(117), pages 203-268.
  • Handle: RePEc:oup:ecpoli:v:39:y:2024:i:117:p:203-268.
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    File URL: http://hdl.handle.net/10.1093/epolic/eiad041
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    Cited by:

    1. Gutmann, Jerg & Neuenkirch, Matthias & Neumeier, Florian, 2024. "Political economy of international sanctions," ILE Working Paper Series 81, University of Hamburg, Institute of Law and Economics.

    More about this item

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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