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Do Sanctions Affect Growth?

Author

Listed:
  • Ohyun Kwon

    (Drexel University)

  • Costas Syropoulos

    (Drexel University)

  • Yoto Yotov

    (Drexel University)

Abstract

Direct measures of the economic impact of sanctions are contaminated by the endogeneity that arises when other events in target countries (e.g., civil or interstate conflicts, political independence, etc.) instigate the imposition of sanctions. To address this issue, we propose a novel instrument, sender's aggressiveness, captured by the number of sanctions imposed in a given year. After establishing the validity of this instrument, we quantify the impact of sanctions on growth in sanctioned states and show that, on average, an additional sanction decreases contemporaneous real GDP per capita in target states by 0.39 percent. We also substantiate the presence of a significant (in magnitude) downward bias in the corresponding OLS estimates and demonstrate that the effects of sanctions on growth vary widely depending on the types of sanctions considered, their purported objectives, measures of their success, and the duration of their effects.

Suggested Citation

  • Ohyun Kwon & Costas Syropoulos & Yoto Yotov, 2022. "Do Sanctions Affect Growth?," School of Economics Working Paper Series 2022-6, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2022_006
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    Cited by:

    1. Djankov, Simeon & Su, Meng, 2025. "The targeting of economic sanctions," Economics Letters, Elsevier, vol. 248(C).
    2. Okafor, Luke & Khalid, Usman & Badeeb, Ramez Abubakr, 2025. "Do the effects of unilateral and multilateral sanctions on energy poverty differ in target economies?," Energy, Elsevier, vol. 327(C).
    3. Djankov, Simeon & Su, Meng, 2025. "The targeting of economic sanctions," LSE Research Online Documents on Economics 127240, London School of Economics and Political Science, LSE Library.
    4. Petrevski, Goran, 2025. "Economic sanctions and output growth: Empirical evidence," EconStor Preprints 325283, ZBW - Leibniz Information Centre for Economics.
    5. Jabari, Leyla & Salem, Ali Asghar & Zamani, Omid & Farzanegan, Mohammad Reza, 2024. "Economic sanctions and energy efficiency: Evidence from Iranian industrial sub-sectors," Energy Economics, Elsevier, vol. 139(C).
    6. Simola, Heli, 2023. "What the literature says about the effects of sanctions on Russia," BOFIT Policy Briefs 8/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. Bondarenko, Yevheniia & Lewis, Vivien & Rottner, Matthias & Schüler, Yves, 2024. "Geopolitical risk perceptions," Journal of International Economics, Elsevier, vol. 152(C).

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    Keywords

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    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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