Economic sanctions and trade flows in the neighbourhood

Abstract

This study has been prepared within the UNU-WIDER project Detecting and countering illicit financial flows that is implemented in collaboration with the University of Copenhagen. The project is part of the Domestic Revenue Mobilization programme, which is financed through specific contributions by the Norwegian Agency for Development Cooperation (Norad).

Trade sanctions and informal employment

“…Studies investigating the effects of international economic sanctions on the economy of the sanctioned state document significant negative effects on GDP growth (Hufbauer et al 2009;Neuenkirch and Neumeier 2015), international trade (Afesorgbor 2019; Haidar 2017), foreign direct investment (FDI) (Mirkina 2018), employment (Etkes and Zimring 2015; Moghaddasi Kelishomi and Nisticò 2022), and human capital (Chakravarty et al 2021;Moeeni 2022). There is also evidence that sanctions lead to increases in poverty and inequality (Afesorgbor and Mahadevan 2016;Neuenkirch and Neumeier 2016) and in corruption and illicit economic activities (Andreas 2005;Bove et al 2021;Crozet et al 2021;Farzanegan 2013;Slavov 2007). Our primary objective is to study the consequences of trade sanctions for the allocation of labour across the formal and the informal sector and address the implications for long-run economic development.…”

“…Studies document that sanctions increase the criminalization of the state, economy, and civil society of both the target country and its neighbours, fostering illegal economic activities, such as smuggling (Andreas 2005;Bove et al 2021;Crozet et al 2021;Farzanegan 2013;Slavov 2007). There is also evidence that sanctions reduce gross domestic product (GDP) growth and increase poverty (Ghomi 2022;Laudati and Pesaran 2022;Neumeier 2015, 2016), and have also detrimental effects on human capital (Chakravarty et al 2021;Moeeni 2022), firms' performance (Ahn and Ludema 2020), and formal employment (Etkes and Zimring 2015;Moghaddasi Kelishomi and Nisticò 2022).…”