We provide quantitative evidence that the primary effects of economic sanctions on trade and welfare are accompanied by strong extraterritorial effects — estimates of the former effects may be ...significantly biased if the latter effects are not taken into account. Furthermore, while the extraterritorial burden of sanctions on trade falls primarily on target countries, the corresponding effect on trade among senders and third countries is positive. General equilibrium analysis suggests that, for targets, the welfare losses due to extraterritorial effects are large and may exceed the losses due to reduced trade with senders. For senders, the gains from increased trade with third countries may outweigh the losses from decreased trade with targets to generate net welfare gains. The welfare effects on third countries are significant, too. However, the direction and size of these effects depend on three key factors: the size of the target, the size of the sender, and the economic ties among the target, the sender, and third countries.
This paper examines both the desirability and feasibility of technology transfers in a setting where institutions governing the security of output or income are imperfect. Based on a ...guns-versus-butter model involving two countries (a technology leader and a technology laggard), our analysis characterizes how global efficiency and the countries’ preferences over transfers depend on the nature of technology, as well as on the initial technological distance between them and the degree of output security. In the case of a general-purpose technology the leader might refuse a transfer, whereas in the case of a sector-specific technology the laggard might have such an incentive. Notably, for both types of technology, our analysis reveals the possible emergence of a “low-technology trap,” wherein a technology transfer to the laggard is more likely to be blocked precisely when the laggard’s initial technology is sufficiently inferior to its rival. We explore how the degree of output security and the laggard's capacity to absorb state-of-the-art technology affect the range of technological distances that generate such traps for each type of technology.
This paper introduces the third update/release of the Global Sanctions Data Base (GSDB-R3). The GSDB-R3 extends the period of coverage from 1950-2019 to 1950-2022, which includes two special periods ...– COVID-19 and the war between Russia and Ukraine. The new update of the GSDB contains a total of 1,325 cases. In response to multiple inquiries and requests, the GSDB-R3 has been amended with a new variable that distinguishes between unilateral and multilateral sanctions. As before, the GSDB comes in two versions, case-specific and dyadic, which are freely available upon request at GSDB@drexel.edu. To highlight one of the new features of the GSDB, we estimate the heterogeneous effects of unilateral and multilateral sanctions on trade. We also obtain estimates of the effects on trade of the 2014 sanctions on Russia.
We analyze how trade openness matters for interstate conflict over productive resources. Our analysis features a terms-of-trade channel that makes security policies trade-regime dependent. ...Specifically, trade between two adversaries reduces each one’s incentive to arm given the opponent’s arming. If these countries have a sufficiently similar mix of initial resource endowments, greater trade openness brings with it a reduction in resources diverted to conflict and thus wasted, as well as the familiar gains from trade. Although a move to trade can otherwise induce greater arming by one of them and thus need not be welfare improving for both, aggregate arming falls. By contrast, when the two adversaries do not trade with each other but instead trade with a third (friendly) country, a move from autarky to trade intensifies conflict between the two adversaries, inducing greater arming. With data from the years surrounding the end of the Cold War, we exploit the contrasting implications of trade between enemies versus trade between friends to provide some evidence that is consistent with the theory.
Using a new, global data base covering the years 1950 to 2015, we study the impact of sanctions on international trade and welfare. We make use of the rich dimensionality of our data and of the ...latest developments in the structural gravity literature. Starting with a broad evaluation by sanction type, we carefully investigate the case of Iran. Effects are significant but also widely heterogeneous across sanctioning countries. Moreover, they depend on the direction of trade. We also perform a counterfactual analysis which translates our partial equilibrium sanction estimates into heterogeneous but intuitive general equilibrium effects within the same framework.
Using a new, global data base covering the years 1950 to 2015, we study the impact of sanctions on international trade and welfare. We make use of the rich dimensionality of our data and of the ...latest developments in the structural gravity literature. Starting with a broad evaluation by sanction type, we carefully investigate the case of Iran. Effects are significant but also widely heterogeneous across sanctioning countries. Moreover, they depend on the direction of trade. We also perform a counterfactual analysis which translates our partial equilibrium sanction estimates into heterogeneous but intuitive general equilibrium effects within the same framework.
We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, ...markets that appear segmented are strategically linked via the incentive compatibility constraint. Importantly, trade costs affect cartel shipments and welfare not only directly but also indirectly through discipline. Using extensive data on international cartels, we find that trade costs exert a negative and significant effect on cartel discipline. In turn, cartel discipline has a negative and significant impact on trade flows, in line with the model.
