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Economic Sanctions and Trade Flows in the Neighborhood

Author

Listed:
  • Vincenzo Bove
  • Jessica Di Salvatore
  • Roberto Nisticò
Abstract
We investigate the effect of economic sanctions on trade flows in countries sharing a border with sanctioned states. According to trade models, sanctions are expected to reduce trade flows, as they disrupt established trading routes and economic relationships with suppliers and customers. However, there may also be instances in which countries circumvent trade restrictions by clandestinely exchanging goods with sanctioned countries across the border and trading on their behalf, which leads to an increase in imports and/or exports. To shed light on this issue, we employ a combination of large-N panel data analysis and comparative case studies using the synthetic control method. We find that, in the aggregate, neighboring countries experience economic costs as sanctions disrupt trade. Yet case studies uncover heterogeneity in countries’ responses, with some exhibiting an increase in trade flows. Possible explanations for these different outcomes include opportunistic behavior and increased costs.

Suggested Citation

  • Vincenzo Bove & Jessica Di Salvatore & Roberto Nisticò, 2023. "Economic Sanctions and Trade Flows in the Neighborhood," Journal of Law and Economics, University of Chicago Press, vol. 66(4), pages 671-697.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/725678
    DOI: 10.1086/725678
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    Cited by:

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    3. Fatemeh Rahimzadeh & Hamed Pirpour & Bahman P. Ebrahimi, 2022. "The impact of economic sanctions on the efficiency of bilateral energy exports: the case of Iran," SN Business & Economics, Springer, vol. 2(9), pages 1-18, September.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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