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A theory of economic sanctions as terms-of-trade manipulation

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  • Becko, John Sturm

Abstract

How can a country design economic sanctions to maximize their economic cost to the sanctioned country at the lowest cost to the sanctioner? I consider this problem from the perspective of international trade and draw a close connection between trade restrictions as economic sanctions and trade restrictions as terms-of-trade manipulation. This connection has useful implications for the design of trade taxes as sanctions: Small sanctions increase welfare in the sanctioning country. Sanctions target the same goods as terms-of-trade manipulation. Sanctions ignore elasticities of demand and supply in the sanctioning country.

Suggested Citation

  • Becko, John Sturm, 2024. "A theory of economic sanctions as terms-of-trade manipulation," Journal of International Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:inecon:v:150:y:2024:i:c:s0022199624000229
    DOI: 10.1016/j.jinteco.2024.103898
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    1. Ryan Chahrour & Rosen Valchev, 2024. "The Dollar in an Era of International Retrenchment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1042-1080, September.
    2. Bondarenko, Yevheniia & Lewis, Vivien & Rottner, Matthias & Schüler, Yves, 2023. "Geopolitical Risk Perceptions," CEPR Discussion Papers 18123, C.E.P.R. Discussion Papers.
    3. Ugur Aytun & Julian Hinz & Cem Ozguzel, 2024. "Shooting down trade: Firm-level effects of embargoes," ERC Working Papers 2404, ERC - Economic Research Center, Middle East Technical University, revised Nov 2024.

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    More about this item

    Keywords

    International trade sanctions; Trade policy; Terms-of-trade manipulation;
    All these keywords.

    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
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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