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The Ripple Effect of Sanctions: Exploring the Impact on Global Value Chains Using a Gravity Model

Author

Listed:
  • Randolph Luca Bruno

    (Universitá Cattolica del Sacro Cuore
    University College London)

  • Maria Cipollina

    (University of Molise)

  • Silvia Dal Bianco

    (University College London
    University of Rome Link Campus University)

Abstract

The article explores and quantifies the intertwined relationship between trade sanctions, Global Value Chains (GVC) participation and revealed comparative advantage (RCA). It presents an original theoretical framework exploring the interaction between sanctions, RCA, and GVC. The empirical exercise adopts an estimation strategy underpinned by a multi-country and multi-sector gravity model exploiting the OECD-Trade in Value Added (TiVA) and the Global Sanctions Data Base (GSDB). The analysis is based on a purpose-built dataset covering GVC participation indexes on 66 origin and destination countries for 23 sectors over the period 1995 and 2018. The analysis fills an important gap in the literature, focused solely on the relationship between GVC and RCA, on the one hand, and trade sanctions and GVC, on the other. We find that the effects of sanctions differ from the buyer (backward) and seller (forward) perspectives; that the RCA in a specific country-sector pair plays a key role in driving sanctions’ negative impact, and finally that the level of heterogeneity of the impact is such that only a fine-grained analyses of each sector vis-à-vis its RCA stance could paint the full picture of this complex phenomenon.

Suggested Citation

  • Randolph Luca Bruno & Maria Cipollina & Silvia Dal Bianco, 2023. "The Ripple Effect of Sanctions: Exploring the Impact on Global Value Chains Using a Gravity Model," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(3), pages 1063-1087, November.
    • Handle: RePEc:spr:italej:v:9:y:2023:i:3:d:10.1007_s40797-023-00242-6
    DOI: 10.1007/s40797-023-00242-6
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    More about this item

    Keywords

    Trade sanctions; GVC; RCA; Gravity model;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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