IDEAS home Printed from https://ideas.repec.org/a/spr/italej/v9y2023i3d10.1007_s40797-023-00242-6.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40797-023-00242-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40797-023-00242-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sergey Mityakov & Heiwai Tang & Kevin K. Tsui, 2013. "International Politics and Import Diversification," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 1091-1121.
    2. Dursun Peksen, 2019. "When Do Imposed Economic Sanctions Work? A Critical Review of the Sanctions Effectiveness Literature," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(6), pages 635-647, September.
    3. Baldwin, Richard & Venables, Anthony J., 2013. "Spiders and snakes: Offshoring and agglomeration in the global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 245-254.
    4. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.
    5. Kirill Muradov, 2017. "Trade costs and borders in global value chains," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(3), pages 487-509, August.
    6. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 857-880.
    7. Tadashi Ito & Lorenzo Rotunno & Pierre-Louis Vézina, 2017. "Heckscher–Ohlin: Evidence from Virtual Trade in Value Added," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 427-446, August.
    8. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    9. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
    10. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    11. Sonali Chowdhry & Julian Hinz & Katrin Kamin & Joschka Wanner, 2024. "Brothers in arms: the value of coalitions in sanctions regimes," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 39(118), pages 471-512.
    12. Cecilia Bellora & Lionel Fontagné, 2019. "Shooting Oneself in the Foot? Trade War and Global Value Chains," Working Papers 2019-18, CEPII research center.
    13. Cristina Constantinescu & Aaditya Mattoo & Michele Ruta, 2020. "Policy Uncertainty, Trade and Global Value Chains: Some Facts, Many Questions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(2), pages 285-308, September.
    14. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    15. T. Clifton Morgan & Constantinos Syropoulos & Yoto V. Yotov, 2023. "Economic Sanctions: Evolution, Consequences, and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 37(1), pages 3-30, Winter.
    16. Felbermayr, Gabriel & Morgan, T. Clifton & Syropoulos, Constantinos & Yotov, Yoto V., 2021. "Understanding economic sanctions: Interdisciplinary perspectives on theory and evidence," European Economic Review, Elsevier, vol. 135(C).
    17. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    18. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    19. Harrigan, James & Venables, Anthony J., 2006. "Timeliness and agglomeration," Journal of Urban Economics, Elsevier, vol. 59(2), pages 300-316, March.
    20. Andreas Goldthau & Simone Tagliapietra, 2022. "Energy crisis: five questions that must be answered in 2023," Nature, Nature, vol. 612(7941), pages 627-630, December.
    21. Choi , Nakgyoon, 2013. "Measurement and Determinants of Trade in Value Added," Working Papers 13-1, Korea Institute for International Economic Policy.
    22. Felbermayr, Gabriel & Kirilakha, Aleksandra & Syropoulos, Constantinos & Yalcin, Erdal & Yotov, Yoto V., 2020. "The global sanctions data base," European Economic Review, Elsevier, vol. 129(C).
    23. John Ravenhill, 2014. "Global value chains and development," Review of International Political Economy, Taylor & Francis Journals, vol. 21(1), pages 264-274, February.
    24. Pflüger, Michael & Tabuchi, Takatoshi, 2019. "Comparative advantage, agglomeration economies and trade costs," Journal of Urban Economics, Elsevier, vol. 109(C), pages 1-13.
    25. Du, Xiayi & Wang, Zi, 2022. "Multinationals, global value chains, and the welfare impacts of economic sanctions," Economics Letters, Elsevier, vol. 220(C).
    26. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    27. Ha Thanh Le & Dung Phuong Hoang & Thang Ngoc Doan & Chuong Hong Pham & Thanh Trung To, 2022. "Global economic sanctions, global value chains and institutional quality: Empirical evidence from cross-country data," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(3), pages 427-449, April.
    28. Kei-Mu Yi, 2010. "Can Multistage Production Explain the Home Bias in Trade?," American Economic Review, American Economic Association, vol. 100(1), pages 364-393, March.
    29. Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
    30. Knut Blind & Axel Mangelsdorf & Crispin Niebel & Florian Ramel, 2018. "Standards in the global value chains of the European Single Market," Review of International Political Economy, Taylor & Francis Journals, vol. 25(1), pages 28-48, January.
    31. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    32. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giorgia Giovannetti & Enrico Marvasi & Giorgio Ricchiuti, 2023. "The Future of Global Value Chains and International Trade: An EU Perspective," 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 851-867, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alonso de Gortari, 2018. "Disentangling Global Value Chains," 2018 Meeting Papers 139, Society for Economic Dynamics.
    2. E. M. Bosker & Bastian Westbrock, 2014. "A theory of trade in a global production network," Working Papers 14-14, Utrecht School of Economics.
    3. Idrisova, Vittoria (Идрисова, Виттория), 2017. "Determinants of Value-Added Exports: The Role of Import Demand Factors [Детерминанты Экспорта Добавленной Стоимости: Роль Факторов Спроса На Импорт]," Working Papers 051715, Russian Presidential Academy of National Economy and Public Administration.
    4. Robert C. Johnson & Guillermo Noguera, 2012. "Fragmentation and Trade in Value Added over Four Decades," NBER Working Papers 18186, National Bureau of Economic Research, Inc.
    5. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    6. Shalah M. Mostashari, 2011. "Vertical specialization, intermediate tariffs, and the pattern of trade: assessing the role of tariff liberalization to U.S. bilateral trade 1989-2001," Globalization Institute Working Papers 71, Federal Reserve Bank of Dallas.
    7. Pol Antràs & Alonso de Gortari, 2020. "On the Geography of Global Value Chains," Econometrica, Econometric Society, vol. 88(4), pages 1553-1598, July.
    8. Agnes Kügler & Andreas Reinstaller & Klaus S. Friesenbichler, 2023. "Can value chain integration explain the diverging economic performance within the EU?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 25-47, March.
    9. Görg, Holger & Jacobs, Anna & Meuchelböck, Saskia, 2024. "Who is to suffer? Quantifying the impact of sanctions on German firms," Journal of Economic Behavior & Organization, Elsevier, vol. 228(C).
    10. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    11. Luca Salvatici & Silvia Nenci, 2017. "New features, forgotten costs and counterfactual gains of the international trading system," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 44(4), pages 592-633.
    12. Inga Heiland, 2017. "Five Essays on International Trade, Factor Flows and the Gains from Globalization," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74, May.
    13. Kouty Manfred, 2018. "Trading Costs in Africa: Does International Supply Chain Connectivity Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(2), pages 85-102, June.
    14. repec:spo:wpmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    15. Kazunobu Hayakawa & Hiroshi Mukunoki, 2023. "The magnification effect in global value chains," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 141-157, February.
    16. 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.
    17. Hakan Yilmazkuday, 2011. "Agglomeration And Trade: State‐Level Evidence From U.S. Industries," Journal of Regional Science, Wiley Blackwell, vol. 51(1), pages 139-166, February.
    18. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    19. Rotunno, Lorenzo & Wood, Adrian, 2020. "Wage inequality and skill supplies in a globalised world," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 529-547.
    20. Yilmazkuday, Hakan, 2009. "Distribution of Consumption, Production and Trade within the U.S," MPRA Paper 16361, University Library of Munich, Germany.
    21. Franco-Bedoya, Sebastian & Frohm, Erik, 2020. "Global trade in final goods and intermediate inputs: impact of FTAs and reduced “Border Effects”," Working Paper Series 2410, European Central Bank.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:italej:v:9:y:2023:i:3:d:10.1007_s40797-023-00242-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.