Export Scarring After a Trade Ban: A Quasi-natural Experiment from the Algerian Embargo

Between June 2022 and October 2024, Algeria imposed a politically motivated embargo on imports from Spain. Because neither the imposition of the embargo nor its lifting was anticipated by Spanish firms, this episode provides a quasi-natural experiment to estimate the causal effect of a sudden market shutdown on subsequent export behavior. We interpret this causal effect as evidence on export hysteresis, i.e., the degree to which exporting fails to resume because of market-specific frictions. We show that the embargo reduced the post-embargo probability of exporting to Algeria by 34%. However, this negative effect is smaller than the impact of an observationally equivalent situation in which a firm simply does not export to a market for two and a half years in the absence of an embargo. This finding suggests that studies relying on non-experimental variation may overstate the effect of export hysteresis on the probability of exporting. We also show that the embargo’s negative effects continued even one year after it was lifted. Finally, we find that the largest decrease in the probability of exporting occurred in firms with a large pre-embargo market share and long export experience in Algeria.