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The effects of heterogeneous sanctions on exporting firms: Evidence from Denmark

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  • Ina C. Jäkel
  • Søren Østervig
  • Erdal Yalcin

Abstract

Sanctions encompass a wide set of policy instruments restricting cross‐border economic activities. In this paper, we study how different types of sanctions affect the export behavior of firms to the targeted countries. We combine Danish register data, including information on firm‐destination‐specific exports, with information on sanctions imposed by Denmark from the Global Sanctions Database. Our data allow us to study firms' export behavior in 62 sanctioned countries, amounting to a total of 453 country‐years with sanctions over the period 2000–2015. Methodologically, we apply a two‐stage estimation strategy to properly account for multilateral resistance terms. We find that, on average, sanctions lead to a significant reduction in firms' destination‐specific exports and a significant increase in firms' probability to exit the destination. Next, we study heterogeneity in the effects of sanctions across (i) sanction types and sanction packages, (ii) the objectives of sanctions, and (iii) countries subject to sanctions. Results confirm that the effects of sanctions on firms' export behavior vary considerably across these three dimensions.

Suggested Citation

  • Ina C. Jäkel & Søren Østervig & Erdal Yalcin, 2024. "The effects of heterogeneous sanctions on exporting firms: Evidence from Denmark," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 161-189, February.
    • Handle: RePEc:bla:reviec:v:32:y:2024:i:1:p:161-189
    DOI: 10.1111/roie.12705
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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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