On the heterogeneous effects of sanctions on trade

Abstract

With the help of a new, comprehensive sanctions database and utilizing the latest developments in the structural gravity literature, we estimate the effects of economic sanctions on international trade. We demonstrate that the average effects of sanctions hide significant heterogeneity depending on the type of sanctions considered, their duration, objectives and sender types. We also zoom in on the sanctions against Iran. We find that their effects are significant but also widely heterogeneous across sanctioning countries, even within the European Union, and depend on the direction of trade. We complement the aggregate analysis with estimates for 170 sectors, showing that sanctions have been effective in decreasing bilateral trade at the sectoral level while the effects vary significantly across sectors and across complete versus partial trade sanctions.