Friends by Sanctions: International Relations, Trade, and Welfare
|
|
- Julianna Owens
- 6 years ago
- Views:
Transcription
1 Friends by Sanctions: International Relations, Trade, and Welfare Yong Suk Lee, Stanford University August 2015 Abstract Despite the wide spread implementation, and debate surrounding the e cacy of sanctions, we have little empirical evidence on the impact of sanctions. This paper examines the impact of sanctions on trade and welfare. Sanctions primarily intend to punish target countries by inhibiting them from the gains from trade. The e ect of sanctions depends on not only the direct bilateral impact on trade but how much trade is diverted to other countries. I decompose international trade by the types of trade partners when countries are sanctioned, and empirically examine the impact of sanctions in a gravity framework. I construct a bilateral panel of all sanctions and trade between 1950 and To mitigate endogeneity, I focus on sanctions motivated by non-economic causes, such as sanctions imposed due to humanitarian or sovereignty issues unrelated to the target-sender trade relations. I find that sanctions reduce bilateral trade by 30%. This average impact almost exactly o sets the impact of regional or free trade agreements that the literature has found. For non-democratic countries the impact is larger at about 47%. Despite the large bilateral trade impacts, trade diversion mitigates the net impact of sanctions. Sanctioned countries increase trade with all countries that do not sanction them by 9%. The net e ect of sanctions is a 14% reduction in trade. However, this impact is asymmetric. Sanctions substantially reduce aggregate trade of non-democracies but do not impact democracies. When both countries are sanctioned by a third party, their trade volume increases substantially. Trade between two countries increases over two-fold when both are sanctioned by a third party country compared to when both are not sanctioned. The results imply that there is a common enemy e ect in trade. I further probe the international relations aspect of trade. I construct the absolute di erence in the democracy level between country pairs and examine the impact of this political distance in a structural trade gravity framework. I find that closer the two countries are on the political spectrum, the larger the trade amount is. This result even holds in the very tight specification where I focus on the variation within country pairs. International relations role in trade diversion generates heterogeneous welfare consequences when countries are sanctioned. I find that sanctions reduce welfare by about 0.5% in non-democracies using a method that summarizes welfare change from the change in trade openness. When I directly estimate the impact on real GDP per capital, which incorporates changes beyond trade openness, the impact becomes substantially larger with sanctions reducing welfare by 7%. Lastly, I find that target countries are willing to su er a 20% decline in GDP per capital before conceding to sanctions. Freeman Spogli Institute for International Studies, Stanford University, 616 Serra St. Stanford, CA yongslee@stanford.edu. I thank Kyle Bagwell, Dave Donaldson, and participants at Stanford International Trade Workshop and the Western Economics Association International Conference for comments. Yoonsang Bae and Danielle Dobos provided excellent research assistance. 1
2 Keywords: Sanctions, Trade Diversion, International Relations, Welfare JEL Codes: F14, F51, F59, F69 2
3 1 Introduction Economic sanctions have become an increasingly popular foreign policy tool. Between 2001 and 2005 there were 138 di erent sanction cases, and 94 countries, almost half of the countries in the world then, were targets of sanctions. The list of target countries includes not only the usual suspects like North Korea, Iran, and Syria, but many of the non-democratic and poor countries around the world. 1 Sanctions predominantly aim to hinder or cut o the target country s access to international trade and finance through various measures, including embargoes, asset freezes, aid and travel restrictions and trade bans. In other words, sanctions leverage by inhibiting countries from the gains from trade. However, sanctions have generally been ine ective in changing the target country s behavior. Hufbauer et al. (2009) find that only 34 percent of the sanctions from 1915 to 2000 were at least partially successful, and that most of the successes happened before the 1970s. Either sanctions are not doing a good job at inhibiting trade or target countries are bearing substantial welfare losses to maintain their political objectives. One reason that sanctions might not be e ective in changing behavior is because sanctions often aim to hinder bilateral trade, whereas trade is multilateral. Globalization and the reduction in trade costs over the decades have enabled countries today to trade with a wide range of countries, and countries may substitute trade partners with another when one becomes less amicable. Despite the wide spread implementation of sanctions, and debate surrounding the e cacy of sanctions, we have relatively little empirical evidence on the impact of sanctions. This paper aims to fill this gap and examines the impact of sanctions on trade and welfare. The e cacy of sanctions depends on the direct impact of sanctions on trade and how well target countries are able to divert trade to other countries. I use an accounting framework to decompose trade into bilateral trade, trade with other sanctioned countries, and trade with countries that do not sanction the target country to examine trade patterns and diversion. I consider sanctions as one element of the bilateral trade friction that changes over time and empirically examine the impact of sanctions within the structural gravity framework which has widely been used in the 1 In contrast, 50 years ago between 1951 and 1955, well into the cold war, there were 41 sanction cases and 31 countries (out of 100) were targets of sanctions. 3
4 trade literature. I also examine the welfare consequences from sanctions. Arkolakis, Costinot, and Rodriguez-Clare (ACR hereafter, 2012) recently illustrated that in a general class of models, the change in welfare due to trade shocks can be represented succinctly by the change in the domestic share of consumption and the trade elasticity. I first estimate the welfare change from sanctions using this method. Since, sanctions could impact welfare through channels other than trade, 2 I also examine the impact of sanctions on real GDP per capital. The validity of the reduced form analysis relies on the assumption that sanctions are exogenous to the countries trade volumes. The diverse causes of sanctions present opportunities for a plausible identification strategy. There are indeed economically motivated sanctions such as, sanctions that arise from trade disputes. However, many sanctions are motivated by humanitarian causes unrelated to the economic relationship between the sender and target. For example, genocide, weapons proliferation, infringement of sovereignty motivate certain countries, often third party western countries, to punish the target country by imposing sanctions. 3 By focusing on these set of sanctions, I am able to minimize endogeneity and better identify the impact of sanctions on trade and welfare. Using the universe of sanctions and bilateral trade data between 1950 and 2005, I find that sanctions reduce bilateral trade by 30%. This average impact almost exactly o sets the impact of regional trade agreements (RTAs) or free trade agreements (FTAs) that the literature has found. For non-democratic target countries the impact of sanctions is larger at about 47%. Despite the large impact of sanctions on bilateral trade, trade diversion mitigates the overall impact. Sanctions increase trade with countries that do not sanction the target country. Because the share of trade with non-sanctioning countries is substantially larger than the share of trade with sanctioning countries, the overall net e ect of sanctions reduces to about a 14% reduction in trade, still a significant impact. This net impact is highly asymmetric between democratic and non-democratic target countries. Sanctions reduce overall trade of non-democracies but have no impact on democracies. The heterogeneous trade diversion by democratic level indicates that country relations and 2 For instance, sanctions may have domestic political-economy and inequality consequences that impact welfare, may impact worker health and productivity, may impact the improvement and maintenance of infrastructure and ultimately firm productivity. 3 In some events, the sender often does not have much or any meaningful trade relationship with the target. For example, the US imposed bilateral sanctions on North Korea when it conducted nuclear tests, but trade between the two is very low. 4
5 a nity may impact trade patterns. I examine how bilateral trade changes when a country pair s sanctions status changes. When both countries are sanctioned by a third party, their trade volume increases substantially. Being sanctioned brings the two closer in terms of trade. This pattern is stronger when we focus on the set of non-democratic countries. Trade between the two increases over two-fold when both are sanctioned by third parties compared to when both are not sanctioned. The results imply that there is a common enemy e ect, where substantial amount of trade is diverted towards countries that face similar hostilities. In other words, sanctions bring target countries, especially non-democratic ones, closer. I further probe into how sanctions impact the international relations aspect of trade. I find that when non-democracies are sanctioned their trading partners become even less democratic - the average polity index of trade partners drops by almost one. However, when democracies are sanctioned, sanctions have no impact on the average democracy level of their trading partners. Sanctions elucidate how international relations are an important factor in determining trade patterns. But are international relations only important in situations that involve hostilities like sanctions and war, or is international relations a general factor that impact trade patterns? I examine whether international relations can explain the patterns of international trade in the structural gravity framework that has done very well in explaining trade patterns. Measuring international relations is challenging and international relations is endogenous to trade. The strategy I pursue is to use the absolute di erence in the polity index between country pairs as a proxy for the a nity between countries. I find that closer the two countries are on the political spectrum, the larger the trade volume is. This result even holds in the very tight specification where I focus on the variation within country pairs. The fact that I get a statistically significant impact on this distance variable in a fully specified structural gravity model indicates that international relations in general impacts the pattern of international trade. International relations role in trade diversion generates heterogeneous welfare consequences when countries are sanctioned. I find that sanctions reduce welfare by about 0.5% in non-democracies when I use ACR s method. When I directly estimate the impact on real GDP per capital, the impact becomes substantially larger with a 7% reduction. Lastly, I examine how large the welfare loss 5
6 is in cases where the target country concedes to sanctions. The reduction in real GDP per capita is about 11% on average when target countries concede. This reduction in welfare is substantially higher for non-democracies. Their autocratic leaders are willing to su er along the lines of a 21% decline in GDP per capital before they concede to the senders. I believe this is the first paper to present a full empirical examination of how the universe of sanctions in the past century has impacted trade and welfare. This paper relates to the literature that examines international relations and trade. Berger et al. (2013) find that CIA interventions during the Cold War increased imports from the US, because foreign governments increased purchases of US products. Martin et al. (2008) examine the relationship between trade and military conflict and find that bilateral trade reduces the probability of conflict but multilateral trade openness increases the probability of conflict. Glick and Taylor (2010) examine the impact of war on bilateral trade. A few papers examine sanctions and trade patterns. Haidar (2015) examines trade diversion in Iran using firm level data, and Yang et al. (2004) find evidence that countries divert trade to the EU when imposed by US sanctions. Lee and Lee (2015) use US sanctions since 1992 and examine how trade patterns change during the threat stages of sanctions and show that international relations uncertainty can impact trade patterns. Also related is the literature that examines the impact of sudden trade barriers created between nations or regions. Atkin and Donaldson (2015) examine the impact of the border between Pakistan and India on trade patterns, and Etkes and Zimring (2015) examine the impact of the blockade along the Gaza Strip. Lastly, I further contribute to the literature that studies the e cacy of sanctions. Eaton and Engers (1992, 1999) presents a game theoretical model that examines the conditions under which sanction threats and imposition occur and when sanctions might be an e ective tool to influence foreign policy. Whang et al. (2013) empirically examine when sanction threats can successfully extract concession from target countries. Lee (2015) examines how autocrats counter sanctions domestically and the subsequent distributional consequences. Using satellite lights data he shows that that North Korea counters the impact of sanctions on the elites by diverting resources to the urban area, which further reduces the welfare of the marginalized population. 6
7 The next section of the paper describes the data and present background and descriptive evidence on sanctions. Section III presents the accounting framework to decompose trade when countries are sanctioned. Section IV presents the empirical strategy. Section V presents the empirical result on sanction and trades. Section VI further explores how political distance between countries explain the trade patterns. Section VII examine the welfare consequences from sanctions. Section VIII concludes. 2 Background on Sanctions and the Data Information on sanctions comes from the Threat and Imposition of Sanctions (TIES) data, a comprehensive data of all sanctions cases from 1945 to 2005, constructed by Morgan, Bapat, and Kobayashi (forthcoming). The TIES data includes all sanctions cases from 1945 to 2005, and has information on the sender and targets, the causes that triggered the sanctions, and the actions taken. It also codes whether the target countries conceded to the sanctions. I focus on the post 1950 periods as sanctions incidences were rare before Sanctions have been increasingly used as a foreign policy tool since the end of the World Wars. Figure 1 presents this pattern over time. The solid line represents the number of sanction cases in e ect each year and the dashed lines indicate the number of targeted countries. The frequency of sanctions has been increasing quite steadily. By 2002 there were over 140 sanction cases in e ect. The number of countries, on the other hand, was relatively stable before the 1990s and then jumps up after. The timing coincides with the end of the Cold War. In short, sanctions have been popular since the World Wars ended, but especially increases in both the frequency of cases and target countries once the World hegemony shifted to capitalism and democracy. The countries that impose sanctions, the senders, and that receive sanctions, the targets, are quite di erent. Table 1 lists the top 15 senders and targets by each decade. The top target countries are diverse and changes over time. The most frequently sanctioned country in the 1950s was the US, followed by Yugoslavia and North Korea. In the following three decades South Africa s apartheid regime was the most frequently targeted, among countries like Cuba. In the 1990s the Middle 7
8 Eastern countries and in the 2000 s Israel became frequent targets. Contrary to the list of target countries the list of top sender countries are much more homogenous. The United States has always been the dominant sender of sanctions by a far margin, followed by the UK, Canada, and other west European nations. The senders of sanctions are predominantly richer western democracies. Table 1 shows that there is substantial asymmetry between the senders and targets of sanctions. Figure 2 summarizes the asymmetry by plotting the average polity index, i.e, a measure of democracy which I describe below, of senders and targets by year. Consistently, there are gaps between the two groups, and if any has become wider in recent years (maybe show gap instead). Figure 3 presents the causes of sanctions by decade. I group the causes into 5 groups. 4 The validity of empirically analyzing the impact of sanctions on trade and welfare hinges upon whether sanctions are exogenous to these economic variables. The diverse causes of sanctions present opportunities for a plausible identification strategy. There are sanctions caused by disputes over trade practices or economic reforms and examining these sanctions su ers from endogeneity. However, as Figure 3 indicates, many sanctions are caused because of non-economic reasons: terrorism, weapons proliferation, human rights, territorial disputes etc. In such cases, the sender is often a third party country not directly involved with the underlying issue, or often does not have significant economic relationship with the target. 5 By focusing on these set of sanctions, I am able to minimize endogeneity and better identify the impact of sanctions on trade and welfare. Figure 4 presents the type of sanctions, i.e., the action of sanctions, by decade. I also group the types in to five categories - suspension of economic agreement, travel ban, termination of foreign aid, asset freeze, or blockade. All of these actions aim to inhibit the target country to international trade and finance, with an ultimate goal of reducing the gains from the trade of goods, money, or people. To construct the panel of sanctions and trade, I merge the TIES data to the the Correlates of Wars (COW) bilateral trade data. I merge in country macro economic variables from the Penn World Tables data and the country democracy level information from the Polity IV data. The 4 Describe the original classifications and groups here. 5 For example, the US imposing on South Africa s apartheid regime, or imposing sanctions on North Korea for conducting nuclear weapons tests. 8
9 Polity IV data, constructed by Marshall, Gurr, and Jaggers (2014), quantifies whether a country is more close to a democracy or an autocracy. The polity index ranges from -10 (strongly autocratic) to 10 (strongly democratic). I will refer to a country as democratic if the polity index takes a positive value and non-democratic otherwise. This is a obviously a rough categorization. I will perform analysis on finer categories in the robustness tests and the appendix. Table 2 presents summary statistics on some of the main variables by democratic status. The final data set is a one-directional country pair level data that spans the universe of countries between 1950 and The trade data often report missing trade or zero trade. The literature has tried di erent adjustments to deal with such cases. The main analysis will take the data as given, i.e., consider zero as zero trade and missing as missing information, but I will also examine results when missing is considered zero trade. To deal with the high frequency of zeroes in the trade data, the literature has used di erent methods. For now I use OLS but will examine how sensitive results are to di erent estimation methods, such as, tobit or poisson regressions. 3 Sanctions and Trade Diversion: Decomposing International Trade If the target country can divert trade to other countries then the overall impact of sanctions will depend on the direct impact of sanctions on trade with the sender but also on how much diversion occurs. A large amount of diversion would most likely mitigate the net impact of sanctions. In examining diversion it will also be important to examine to whom trade is being diverted to. If the degree of diversion di ers by the type of target countries, e.g., democratic vs non-democratic countries, then there could be overall distributional consequences from sanctions. Trade models and structural gravity equations focus on the economic, geographic, and international organizational determinants of trade. However, sanctions are simply another form of trade friction between countries, and because the causes of sanctions were motivated by humanitarian, security, sovereignty issues and so on, the pattern of divergence would likely reflect the trading 9
10 partner s value on the issues involved. 6 In other words, some political preference between countries, or international relations could impact the patterns of international trade in trade diversion but also in general. I later explore this further in Section 6. I use a simple accounting framework to empirically examine trade diversion. The accounting framework easily allows one to decompose trade patterns based on the trade shock of interest, in this case, sanctions. Since an accounting equation is an identity reflecting general equilibrium outcomes, the elasticity of each component of the accounting equation to a trade shock can potentially be estimated using the standard gravity equation. To ease notation I drop time indexes but consider trade at any year. I use the terms sender and target when referencing countries in relation to both sanctions and trade. S ij refers to sanctions imposed by i on j and X ij refers to the trade flow from i to j. X j refers to all trade flows into j, i.e., total imports by j. The sender country i is interested in how the sanction it imposes on j impacts j s trade. Not only is i interested in the impact on bilateral trade with j, but is concerned of any trade diversion that might negate the impact of the sanctions it imposes. Hence, I examine both the direct impact of sanctions on bilateral trade, but also the impact of sanctions on trade with other countries. Given that multiple countries can sanction j, I further decompose import from other countries into import from other sanctioning countries and import from non-sanctioning countries. The following identity describes the total quantity of imports by j. X j = X ij + X is j + X i ns j (1) where X is j denotes j s total imports from sanctioning countries other than i and X i ns j denotes j s total imports from non-sanctioning countries. Di erentiating with respect to sanctions, I derive the following expression for the impact of country i s sanction on trade. d ln X j ds ij = r ij d ln X ij ds ij d ln X i + r s j d ln X i i s j + r ns j i ds ns j (2) ij ds ij 6 Note that I am implicitly assuming that the states influence firms s trade partners. 10
11 In this expression, s ij is the fraction of total imports accounted for by imports by i, s i s j is the fraction of import from other countries than i that sanction j, and s i ns j is the fraction of import from countries that do not sanction j. Note that for now, I have sanctions as a continuous variable but will consider both the above equations can easily accommodate a discrete sanction variable. This decomposition amounts to a series of regressions, which one can estimate given convincing identifying variation of sanctions. I am ultimately interested in how sanctions impact welfare of the target country which can be examined using the more aggregate target country level data. Under the ACR framework the change in welfare is expressed as d ln W j = 1 1 d ln jj (3) where W j refers to the welfare of country j and that a country consumes that are produced locally, and 1 jj is the domestic share, i.e., the fraction of goods is the trade elasticity. Hence, the welfare impact of sanctions can be summarized, given the trade elasticity, by the change in the country s domestic share. jj can be estimated as 1 X j Y j from the data and takes on values from Head and Mayer (2014). 7 The above is based on ACR s assumption, which are generally accepted assumptions in the literature, but nonetheless, I also examine the a-theoretical and reduced form impact of sanctions by examining how sanctions impact the target country s real GDP per capita. The following section describes the identifying sources of variation that I use and the resulting estimation equations. 4 Empirical Strategy I estimate the e ect of sanctions on the di erent trade flows in equation (2) based on the gravity equation. The general gravity equation, where X ijt denotes country j s import from country i, can be represented by 7 Discuss measurement of domestic share in more detail. 11
12 X ijt = G t M ex it M im jt ijt (4) G t is a common year-specific factor determining trade, M s it and M t jt represent exporter i and importer j s multilateral terms. These are indexes that represent i s exporting and j s importing capabilities based on structural gravity equations. ijt represents the trade friction or bilateral accessibility of j to i. Economic sanctions are also a part of ijt. I approximate the log of ijt as a linear combination of factors that a ect trade costs between i and j. ln ijt = DSanc ijt + ij + u ijt. (5) DSanc ijt is a dummy variable equal to one if country j is sanctioned by country i. As before, in the context of sanctions country i is the sender and j is the target. ij captures the unobserved bilateral trade costs terms that are fixed over time, such as, distance, border, etc. u ijt is assumed to be random noise. I estimate the gravity equation by taking the log of (5) and substituting in (6) which returns ln X ijt =lng t +lnm s it +lnm t jt + DSanc ijt + ij + u ijt. (6) Note that I now denote the multilateral terms with superscript s for sender and t for target to focus on the sanction context. I use year dummies to capture ln G t, sender-year and target-year fixed e ects to capture ln Mit s and ln M jt t, and target-sender pair (dyad) fixed e ects to capture ij. I will estimate equation (7) as linear regression with high-dimensional fixed e ects. The high dimensional fixed e ects often make estimation challenging and the literature has used various methods, including ratio s, triads, etc.. to estimate (3). Head and Mayer (2013) perform a Monte- Carlo of the di erent methods and find that OLS with fixed e ects when implementable to well. The estimation of the first partial derivatives in equation (2) will be based on the empirical gravity equation (7). The high-dimensional fixed e ects imply that I will be using only the sanctions variations within a country pair over time while controlling for any sender and target specific 12
13 factors that can vary each year. These are tight controls but nonetheless one may be concerned that sanctions maybe endogenous even within country pairs. Such concern is valid if one considers sanctions triggered by trade disputes. For instance, dumping of certain goods by one country may trigger sanctions by another. However, endogeneity concern is substantially reduced if we focus on sanctions that are triggered by the target country s rogue behavior towards its domestic population, e.g., South Africa s apartheid regime, Syria s civil conflict, and has no direct relation with the senders, often the western democracies. This is why in the empirical analysis I focus sanctions triggered by humanitarian or political issues. US s decision to sanction on Syria or Russia are not motivated by trade concerns. In some sense, despite the economic and trade consequences, the US imposes sanctions to show that such rogue behavior can not be left unpunished. Similarly, I estimate the other partial derivatives that focus on trade diversion in equation (2) using equation (7) s bilateral framework and constructing trade values that correspond to X i s j, j s import from countries other than i that sanction j in year t, and X i ns j, j s import from countries that do not sanction j in year t. Since, my focus is empirical, rather than making theoretical assumption of balanced trade, I examine exports separately in addition to imports when the target country is sanctioned. The above gravity equation and equation (2) examines the impact of sanctions on bilateral trade from the sender s perspective. This is what the sender of sanctions would be interested in. I am also interested in the target country s perspective, i.e., how do sanctions impact overall trade and welfare of the target country? Countries are often sanctioned by multiple senders when sanctioned because of humanitarian or sovereignty issues. Hence, examining the target s perspective requires using data at the target country level. In practice, I use the following specification ln X jt = Sanc jt + Z jt + j + t + u ijt. (7) Sanc jt can be a dummy variable indicating whether country j was ever sanctioned in year t, or the total number of sanctions, or the set of indicators for each number of sanctions. Z jt is the set of target country variables, such as log population and log GDP. j and t are country and year 13
14 fixed e ects. Similarly, equation (8) serves as the base equation when I estimate trade by type of partners, domestic share, or real GDP per capita. 5 Results on Bilateral Trade and Trade Diversion Table 3 present results for the three elasticies from equation (2) : the direct impact of sanctions on bilateral trade, the impact on trade with other sanctioning countries, and the impact on trade with countries that do not sanction the target country. The latter represents the trade diversion that I am particularly interested in. The estimation framework is the structural gravity framework presented in equation (7), which includes the full set of fixed e ects. I cluster standard errors by country pairs. Panel A present results for imports and Panel B for exports. Column (1) indicates that sanctions of any type on average reduce import from the sender by about 27%. As discussed previously, focusing on sanctions motivated by non-economics related causes alleviates endogeneity. In column (2) I find that sanctions triggered by non-economic causes have a larger impact and significantly reduce import from the sender by 33%. Columns (3) and (4) examine the impact of sanction on imports from other sanctioning countries. This specification represents a general equilibrium outcome since, by definition the other countries are sanctioning the target. As one can expect the coe cient estimates in columns (1) and (2) are similar to that of columns (3) and (4). Columns (5) and (6) present the trade diversion from sanctions. Sanctions increase import from non-sanctioning countries by about 9%. The magnitudes are about 3.5 fold smaller than the impact on imports from sanctioning countries. However, the fraction of imports each group comprises will jointly determine the overall impact as derived in equation (2). If the fraction of imports from non-sanctioning countries is large enough, then the impact of sanction on overall imports would be neutralized due to the diversion in trade. Panel B presents results when I examine the impact of sanction on the target country s export. Overall results show very similar patterns from that of Panel A. 14
15 Table 4 presents the impact by sanctions type. Sanctions restrict trade but takes various forms. Columns (1) and (2) present results when I run regressions on the di erent types of sanctions individually, and columns (3) and (4) are results when I include all sanction types in one regression. As before, the estimation framework is the structural gravity framework presented in equation (7), which includes the full set of fixed e ects, and I cluster standard errors by country-pairs. When I examine each sanction type separately, the coe cient estimates are all negative and the majority of the estimates are statistically significant at the 1% level. However, in columns (3) and (4) economic embargoes stand out with large e ects. Asset freeze has a significant impact on reducing imports, and termination of foreign aid significantly reduces exports. Total economic embargoes have the strongest impact, reducing bilateral trade by about 50% (imports by 48% and exports by 67%). Given that each sanction type has the expected impacts, I will not focus on this margin further. Rather, I will focus on the heterogeneity of sanctions based on their causes, and primarily focus on sanctions due to non-economic causes, since those are less subject to endogeneity. The degree of trade diversion and how much diversion neutralizes the impact of sanctions will likely di er by the target country. I examine this heterogeneity by focusing on the democracy level of the target countries. I focus on the democracy level because depending on the level of democracy the target government would respond di erently from international pressure and internal hardship. An autocracy may be more determined to deter sanctions with less concern about the damage it causes to it s population. Also, because the causes of sanctions were motivated by humanitarian, security, sovereignty issues and so on, the pattern of divergence would likely reflect the trading partner s value on the issues involved. The level of a country s democracy is one simple way to proxy for these values. Table 5 presents the bilateral trade and trade diversion results by the target country s level of democracy. I focus on sanctions due to non-economic causes. I divide target countries into two categories, non-democratic and democratic, based on whether the polity index is less or greater than zero. Obviously, this encompasses a wide range, but the results are substantially di erent between the two. Panel A indicates that sanctions reduce bilateral trade by almost 50% in non-democracies, and the impact is statistically significant at the 1% level. However, the impact of sanctions on 15
16 bilateral trade for democracies are smaller in magnitude and not significant at the 5% level. The amount of trade diversion to non-sanctioning countries are also higher for non-democracies at 11% compared to 8% for democracies and the two estimates are statistically di erent. The results for exports in Panel B mirror the results for imports in Panel A. The fact that there is di erential impact and diversion from sanctions by the level of democracy could imply several things - senders may impose harsher sanctions on non-democracies, the institutional capacity to deal with sanctions may di er by the level of democracy, and the network of countries, or allies di er between democracy levels. I explore this further in later sections. The previous tables indicate that there is a significant impact of sanctions on reducing bilateral trade, but also that there is substantial trade diversion due to sanctions. Then what is the net impact of sanctions on trade? Table 6 examines the aggregate impact of sanctions on the target country s import and export. I will focus on Panels C and D, which examine the non-economically motivated sanctions, for the discussion. Panel C column (1) indicates that sanctions reduce aggregate import by 14% on average, but as columns (2) and (3) indicate the reduction only comes from non-democratic countries. In other words, despite significant trade diversion, non-democracies see a substantial reduction in aggregate trade because of sanctions, in the order of 22% for both imports and exports. On the other hand, democracies see no reduction in aggregate trade from sanctions. In Panel D, I semi-parametrically examine the impact of sanctions by including dummy variables representing the number of sanctions each year. Being sanctioned by one country significantly reduces aggregate import for non-democracies and the magnitude generally increases with the number of sanctions. When sanctioned by five or more countries the impact almost doubles. However, for democracies sanctions have no significant impact on both imports and exports. The only coe cient estimate that is weakly significant is on imports when the target is sanctioned by five or more countries. Table 6 implies that sanctions have welfare impacts only on non-democracies. 16
17 6 International Relations and Trade In this section, I further explore the patterns of diversion. If sanctions cause diversion then who are the target countries diverting trade towards? In Table 7, I examine how bilateral trade changes when the country pair s sanctions status changes. Specifically, I ask how trade volumes di er when both are sanctioned by a third party country, when only one is sanctioned by a third party country, and when neither are sanctioned, compared to situations when one is sanctioning the other. The results paint an interesting picture. When both countries are sanctioned by a third party, their trade volume increases substantially more compared to all other situations. This pattern is stronger when we focus on the set of non-democratic countries. Trade between the two increases over twofold when both are sanctioned by third parties compared to when both are not sanctioned. Table 7 provides evidence that there is this common enemy e ect where substantial amount of trade is diverted towards countries that face common threats. In other words, sanctions bring target countries, especially non-democratic ones, closer. I further probe into how sanctions impact the international relations aspect of trade. In Table 8, the dependent variable is trade weighted polity index of the target country s trading partners. Results are similar across the di erent specification. As before, I focus on Panel C for the discussion. On average sanctions reduce the polity index of trading partners by 0.5 and this e ect is statistically significant at the 1% level. Again, when I divide the sample, we can see that this result is driven by non-democracies. When non-democracies are sanctioned their trading partners become less democratic - the polity index drops by almost one. However, when democracies are sanctioned sanctions have no impact on the average polity index of their trading partners. With sanctions as the forcing mechanism, tables 7 and 8 show us how the a nity between countries impact trade patterns. In other words, sanctions elucidate that international relations is an important factor that impacts trade patterns. But is international relations only important in situations that involve hostilities like sanctions and war? Or is international relations a general factor that impact trade patterns? Table 9 examines whether international relations can impact international trade in the structural gravity equation which has been very successful in explain- 17
18 ing trade patterns. Measuring international relations is challenging and international relations is endogenous to trade. The strategy I pursue is to use the absolute di erence in the polity index between country pairs as a proxy for a nity between countries. Democracies tend to like democracies and autocracies tend to like autocracies. Alliances are formed between countries to counter hegemony. The post World War years have been shaped by alliances forged along ideological lines during the Cold War and by the Western democratic dominance post-cold war. The dependent variable in Table 9 is total trade between two countries, i.e., export plus import. Columns (1) to (3) present estimates on absolute di erence in the polity index. In the full sample result of column (1), a decrease in the absolute distance by one increases trade by 3%. The impact becomes smaller when I split the sample, but is still statistically significant. In other words, political distance between countries is important in determining trade patterns. Columns (1) to (3) control for the target-year and sender-year fixed e ects, but not the country pair fixed e ects. Endogeneity is a concern, since geographic distance which is omitted may be correlated with political distance. I control for such endogeneity in columns (4) to (6), by additionally including country-pair fixed e ects. Hence, I am now examining the impact of the change in absolute political distance within country-pairs. This is a tight specification as one can imagine that democratic levels are often quite persistent and changes are slow. Nonetheless, column (4) indicates that closer the two countries are on the political spectrum, the larger the trade amount is. The impact is statistically significant but the magnitude becomes smaller. When I split samples between democracies and autocracies, the estimates are similar but the standard errors increase quite a bit. This is natural given that the variation in the polity index between country pairs will likely come from country pairs with one above and one below the zero polity cuto I use. However, the fact that I get a statistically significant impact on this distance variable even in a fully specified structural gravity model indicates that international relations plays an important role in international trade. 18
19 7 Welfare Implications International relations role in trade diversion would generate heterogeneous welfare consequences when countries are sanctioned. In this section I estimate the welfare consequences from sanctions. How do sanctions impact welfare and how large of a welfare loss do sanctions need to generate for target countries to concede? Recall that in Table 6 we saw that despite significant trade diversion, non-democracies still see a substantial reduction in aggregate trade when sanctioned, in the order of 22%, whereas democracies see no reduction in aggregate trade. The reduction in trade has direct implications for welfare. ACR (2012) shows that the welfare change from trade shocks can be succinctly presented using the change in the domestic share of consumption and trade elasticity. I use their formula and the trade elasticity of 5, the median value from Head and Mayer s (2013) meta analysis of gravity estimates. I first estimate the impact of sanctions on log domestic share in Table 10. Domestic share is calculated as one minus the import share of GDP. If sanctions reduce trade, the domestic share would increase, thereby reducing welfare. Focusing on Panel C, I find that sanctions increase domestic share by in column (1). I further control for the country s trend in openness by including country specific time trends in column (2). The impact drops to about a half to 0.014, but is still statistically significant at the 5% level. I next examine democracies and non-democracies separately. In specifications with target country specific time trends, the increase in domestic share due to sanctions is significant for non-democracies only. A sanction event increases domestic share by 0.02 in non-democracies. How does this translate into welfare changes? Using equation (4) and -5 for 1, the decrease in welfare amounts to about 0.5%. This result measures the welfare changes due to the reduction in trade based on the ACR framework. However, there may be other channels than trade where sanctions can impact welfare. For instance, sanctions would likely impact the internal reallocation of resources for production as documented in Lee (2015). Also, sanctions could impact the budget and negatively a ect the fundamental factors of development like health, education, infrastructure, etc. Hence in Table 11, I directly examine how sanctions a ect real GDP per capital measured in 2005 dollars. Focusing 19
20 on Panel C column (4), sanctions reduce the target country real GDP per capita by 7%. This is a substantially larger impact than what we get based on the ACR method. This discrepancy may represent the channels other than trade by which sanctions impact welfare. Lastly, I examine how big of a welfare loss there is in cases where the target country concedes to sanctions in Table 12. The variable concedes to sanctions denotes indicates situations where the target country unconditionally obliges to all or part of the sender s request Focusing on noneconomically motivated sanctions in Panel B, GDP per capita loss amounts to about 11% on average when target countries concede. The welfare loss is substantially higher for non-democracies at 21%. Since there are many targets that never concede, I examine the additional welfare loss from conceding to sanctions, in addition to the imposition of sanctions. Column (4) indicates that sanctions reduce welfare by 11% in non-democracies and that they see a further 11% reduction in GDP per capital when targets concede. Target countries, or more like their autocratic leaders, are willing to su er along the lines of a 20% decline in GDP per capital before they give in to the senders. 8 Conclusion Despite the wide spread implementation, and debate surrounding the e cacy of sanctions, we have little empirical evidence on the impact of sanctions. This paper examines the impact of sanctions on trade and welfare. Sanctions primarily intend to punish target countries by inhibiting them from the gains from trade. The e ect of sanctions depends on not only the direct bilateral impact on trade but how much trade is diverted to other countries. I decompose international trade by the types of trade partners when countries are sanctioned, and empirically examine the impact of sanctions in a gravity framework. I construct a bilateral panel of all sanctions and trade between 1950 and To mitigate endogeneity, I focus on sanctions motivated by non-economic causes, such as sanctions imposed due to humanitarian or sovereignty issues unrelated to the target-sender trade relations. I find that sanctions reduce bilateral trade by 30%. This average impact almost exactly o sets the impact of regional or free trade agreements that the literature has found. For 20
21 non-democratic countries the impact is larger at about 47%. Despite the large bilateral trade impacts, trade diversion mitigates the net impact of sanctions. Sanctioned countries increase trade with all countries that do not sanction them by 9%. The net e ect of sanctions is a 14% reduction in trade. However, this impact is asymmetric. Sanctions substantially reduce aggregate trade of non-democracies but do not impact democracies. When both countries are sanctioned by a third party, their trade volume increases substantially. Trade between two countries increases over twofold when both are sanctioned by a third party country compared to when both are not sanctioned. The results imply that there is a common enemy e ect in trade. I further probe the international relations aspect of trade. I construct the absolute di erence in the democracy level between country pairs and examine the impact of this political distance in a structural trade gravity framework. I find that closer the two countries are on the political spectrum, the larger the trade amount is. This result even holds in the very tight specification where I focus on the variation within country pairs. International relations role in trade diversion generates heterogeneous welfare consequences when countries are sanctioned. I find that sanctions reduce welfare by about 0.5% in non-democracies using a method that summarizes welfare change from the change in trade openness. When I directly estimate the impact on real GDP per capital, which incorporates changes beyond trade openness, the impact becomes substantially larger with sanctions reducing welfare by 7%. Lastly, I find that target countries are willing to su er a 20% decline in GDP per capital before conceding to sanctions. 21
22 References Arkolakis, C., A. Costinot, and A. Rodriguez-Clare New Trade Models, Same Old Gains? American Economic Review. Atkin D., and D. Donaldson Berger, D., Easterly, W., Nunn, N., and S. Satyanath Commercial Imperialism? Political Influence and Trade During the Cold War. American Economic Review. 103(2): Davis, Lance, and Stanley Engerman History Lessons Sanctions: Neither War nor Peace. Journal of Economic Perspectives, 17(2): Dashti-Gibson, Jaleh, Patricia Davis, and Benjamin Radcli On the Determinants of the Success of Economic Sanctions: An Empirical Analysis. American Journal of Political Science, 41(2): Eaton, J. and M. Engers (1992), Sanctions. Journal of Political Economy, 100, Eaton, Jonathon, and Maxim Engers Sanctions: Some Simple Analytics. American Economic Review Papers and Proceedings Etkes and Zimring Glick, R. and A. M. Taylor (2010), Collateral: Damage: Trade Disruption and the Economic Impact of War. Review of Economics and Statistics, 92(1), Haidar, J Head, K., T. Mayer, and J. Ries (2010), The Erosion of Colonial Trade Linkages after Independence. Journal of International Economics, 81(1), Hufbauer, Gary C., Je erey J. Schott, Kimberly Ann Elliott, Barbara Oegg. Economic Sanctions Reconsidered, 3rd Ed. Washington, DC: Institute for International Economics, Lee Y Countering Sanctions: The Unequal Geographic Impact of Economic Sanctions in North Korea. Stanford Center for International Development Working Paper No Lee, S. and Y. Lee Political Influence and Trade Uncertainty: Evidence from Sanctions Threats and Impositions. mimeo. Levy, Philip I Sanctions of South Africa: What Did They Do? American Economic Review Papers and Proceedings
23 Marshall, M. G., T. R. Gurr, and K. Jaggers (2014), Political Regime Characteristics and Transitions, Polity IV dataset version Distributed by Center for Systemic Peace. Martin. P, T. Mayer, and M. Thoenig (2008), Make Trade Not War? Review of Economic Studies, 75(3), Mayer, T. and K. Head Gravity Equations: Workhorse, Toolkit, Cookbook. Handbook of International Economics Vol. 4. Morgan, T. C., N. A. Bapat, and Y. Kobayashi (forthcoming), Threats and Imposition of Economic Sanctions: Updating TIES Conflict Management and Peace Studies. Nunn, N. and N. Qian U.S. Food Aid and Civil Conflict. American Economic Review, 104(6): Whang, Taehee, Elena V. McLean, and Douglas W. Kuberski Coercion, Informaiton, and the Success of Sanction Threats. American Journal of Political Science, 57(1):
24 Figure 1. Sanctions and target countries over time 140! 120! 100! 80! 60! 40! 20! 0! 1950! 1952! 1954! 1956! 1958! 1960! 1962! 1964! 1966! 1968! 1970! 1972! 1974! 1976! 1978! 1980! 1982! 1984! 1986! 1988! 1990! 1992! 1994! 1996! 1998! 2000! 2002! 2004! Sanctions! Target!countries!! 24!
25 Figure 2. Polity index of sender and target 12! 10! 8! 6! 4! 2! 0! 82! 84! 86! 1950! 1952! 1954! 1956! 1958! 1960! 1962! 1964! 1966! 1968! 1970! 1972! 1974! 1976! 1978! 1980! 1982! 1984! 1986! 1988! 1990! 1992! 1994! 1996! 1998! 2000! 2002! 2004! sender! target!! 25!
26 Figure 3. Causes of sanctions by decade 100! 90! 80! 70! 60! 50! 40! 30! 20! 10! 0! 1950s! 1960s! 1970s! 1980s! 1990s! 2000s! Other! Trade!Practices/Economic! Reform! Weapons!Proliferation/ Terrorism/Drug!TrafGicking! Improve!Human!Rights,! Environmental!Practices! Release!Citizens,!Property/! Territorial!Dispute/!Deny! Strategic!Material! Figure 4. Type of sanctions by decade 100! 90! 80! 70! 60! 50! 40! 30! 20! 10! Suspension!of!Economic! Agreement! Travel!Ban! Termination!of!Foreign!Aid! Asset!Freeze! Blockade! 0! 1950s! 1960s! 1970s! 1980s! 1990s! 2000s!! 26!
27 Table 1. Top senders and targets by decade! 27!
Just War or Just Politics? The Determinants of Foreign Military Intervention
Just War or Just Politics? The Determinants of Foreign Military Intervention Averyroughdraft.Thankyouforyourcomments. Shannon Carcelli UC San Diego scarcell@ucsd.edu January 22, 2014 1 Introduction Under
More informationImmigration and Internal Mobility in Canada Appendices A and B. Appendix A: Two-step Instrumentation strategy: Procedure and detailed results
Immigration and Internal Mobility in Canada Appendices A and B by Michel Beine and Serge Coulombe This version: February 2016 Appendix A: Two-step Instrumentation strategy: Procedure and detailed results
More informationThe Impact of Conflict on Trade Evidence from Panel Data (work-in-progress draft)
The Impact of Conflict on Trade Evidence from Panel Data (work-in-progress draft) Katrin Kamin, Department of Economics, Chair of International Economics, University of Kiel Abstract This paper analyses
More informationMeasuring International Skilled Migration: New Estimates Controlling for Age of Entry
Measuring International Skilled Migration: New Estimates Controlling for Age of Entry Michel Beine a,frédéricdocquier b and Hillel Rapoport c a University of Luxemburg and Université Libre de Bruxelles
More informationOnline Appendix. Capital Account Opening and Wage Inequality. Mauricio Larrain Columbia University. October 2014
Online Appendix Capital Account Opening and Wage Inequality Mauricio Larrain Columbia University October 2014 A.1 Additional summary statistics Tables 1 and 2 in the main text report summary statistics
More informationSkill Classification Does Matter: Estimating the Relationship Between Trade Flows and Wage Inequality
Skill Classification Does Matter: Estimating the Relationship Between Trade Flows and Wage Inequality By Kristin Forbes* M.I.T.-Sloan School of Management and NBER First version: April 1998 This version:
More informationThe Trade Liberalization Effects of Regional Trade Agreements* Volker Nitsch Free University Berlin. Daniel M. Sturm. University of Munich
December 2, 2005 The Trade Liberalization Effects of Regional Trade Agreements* Volker Nitsch Free University Berlin Daniel M. Sturm University of Munich and CEPR Abstract Recent research suggests that
More informationDoes the G7/G8 Promote Trade? Volker Nitsch Freie Universität Berlin
February 20, 2006 Does the G7/G8 Promote Trade? Volker Nitsch Freie Universität Berlin Abstract The Group of Eight (G8) is an unofficial forum of the heads of state of the eight leading industrialized
More informationEconomic Sanctions: An Effective EU Foreign Policy Tool?
FACULTY OF ECONOMIC AND SOCIAL SCIENCES & SOLVAY BUSINESS SCHOOL Economic Sanctions: An Effective EU Foreign Policy Tool? Martijn ADAM 0526284 Promotor: Florian TRAUNER Jury: Xu TIAN, Mohammad SALMAN Academic
More informationMigration and Tourism Flows to New Zealand
Migration and Tourism Flows to New Zealand Murat Genç University of Otago, Dunedin, New Zealand Email address for correspondence: murat.genc@otago.ac.nz 30 April 2010 PRELIMINARY WORK IN PROGRESS NOT FOR
More informationThe WTO Trade Effect and Political Uncertainty: Evidence from Chinese Exports
Abstract: The WTO Trade Effect and Political Uncertainty: Evidence from Chinese Exports Yingting Yi* KU Leuven (Preliminary and incomplete; comments are welcome) This paper investigates whether WTO promotes
More informationSupplementary Material for Preventing Civil War: How the potential for international intervention can deter conflict onset.
Supplementary Material for Preventing Civil War: How the potential for international intervention can deter conflict onset. World Politics, vol. 68, no. 2, April 2016.* David E. Cunningham University of
More informationImmigration, Information, and Trade Margins
Immigration, Information, and Trade Margins Shan Jiang November 7, 2007 Abstract Recent theories suggest that better information in destination countries could reduce firm s fixed export costs, lower uncertainty
More informationDevelopment Economics: Microeconomic issues and Policy Models
MIT OpenCourseWare http://ocw.mit.edu 14.771 Development Economics: Microeconomic issues and Policy Models Fall 2008 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.
More informationLessons from Europe s internal
Lessons from Europe s internal market for TTIP Prof. Gabriel Felbermayr, PhD Ludwig Maximilians Universität München The Transatlantic Trade and Investment Pact (TTIP) Bruegel, Brussels, July 18, 2013 Ifo
More informationEfficiency Consequences of Affirmative Action in Politics Evidence from India
Efficiency Consequences of Affirmative Action in Politics Evidence from India Sabyasachi Das, Ashoka University Abhiroop Mukhopadhyay, ISI Delhi* Rajas Saroy, ISI Delhi Affirmative Action 0 Motivation
More informationEndogenous antitrust: cross-country evidence on the impact of competition-enhancing policies on productivity
Preliminary version Do not cite without authors permission Comments welcome Endogenous antitrust: cross-country evidence on the impact of competition-enhancing policies on productivity Joan-Ramon Borrell
More informationGender preference and age at arrival among Asian immigrant women to the US
Gender preference and age at arrival among Asian immigrant women to the US Ben Ost a and Eva Dziadula b a Department of Economics, University of Illinois at Chicago, 601 South Morgan UH718 M/C144 Chicago,
More informationNBER WORKING PAPER SERIES THE TRADE CREATION EFFECT OF IMMIGRANTS: EVIDENCE FROM THE REMARKABLE CASE OF SPAIN. Giovanni Peri Francisco Requena
NBER WORKING PAPER SERIES THE TRADE CREATION EFFECT OF IMMIGRANTS: EVIDENCE FROM THE REMARKABLE CASE OF SPAIN Giovanni Peri Francisco Requena Working Paper 15625 http://www.nber.org/papers/w15625 NATIONAL
More informationSize of Regional Trade Agreements and Regional Trade Bias
Size of Regional Trade Agreements and Regional Trade Bias Michele Fratianni * and Chang Hoon Oh** *Indiana University and Università Politecnica delle Marche **Indiana University Abstract We test the relationship
More informationA COMPARISON BETWEEN TWO DATASETS
A COMPARISON BETWEEN TWO DATASETS Bachelor Thesis by S.F. Simmelink s1143611 sophiesimmelink@live.nl Internationale Betrekkingen en Organisaties Universiteit Leiden 9 June 2016 Prof. dr. G.A. Irwin Word
More informationLabor Market Dropouts and Trends in the Wages of Black and White Men
Industrial & Labor Relations Review Volume 56 Number 4 Article 5 2003 Labor Market Dropouts and Trends in the Wages of Black and White Men Chinhui Juhn University of Houston Recommended Citation Juhn,
More informationResearch Report. How Does Trade Liberalization Affect Racial and Gender Identity in Employment? Evidence from PostApartheid South Africa
International Affairs Program Research Report How Does Trade Liberalization Affect Racial and Gender Identity in Employment? Evidence from PostApartheid South Africa Report Prepared by Bilge Erten Assistant
More informationIs Corruption Anti Labor?
Is Corruption Anti Labor? Suryadipta Roy Lawrence University Department of Economics PO Box- 599, Appleton, WI- 54911. Abstract This paper investigates the effect of corruption on trade openness in low-income
More informationInternational Remittances and Brain Drain in Ghana
Journal of Economics and Political Economy www.kspjournals.org Volume 3 June 2016 Issue 2 International Remittances and Brain Drain in Ghana By Isaac DADSON aa & Ryuta RAY KATO ab Abstract. This paper
More informationTHE GLOBAL FINANCIAL CRISIS AND ECONOMIC INTEGRATION: EVIDENCE ON ASEAN-5 COUNTRIES 1
Journal of Indonesian Economy and Business Volume 24, Number 3, 2009, 291 300 THE GLOBAL FINANCIAL CRISIS AND ECONOMIC INTEGRATION: EVIDENCE ON ASEAN-5 COUNTRIES 1 Lukman Hakim Faculty of Economics Universitas
More informationInternational Trade and Migration: A Quantitative Framework
International Trade and Migration: A Quantitative Framework Mario Larch 1 Steffen Sirries 2 1 University of Bayreuth, ifo Institute, CESifo, and GEP 2 University of Bayreuth ETSG 2013 1 / 31 Why international
More informationREMITTANCES, POVERTY AND INEQUALITY
JOURNAL OF ECONOMIC DEVELOPMENT 127 Volume 34, Number 1, June 2009 REMITTANCES, POVERTY AND INEQUALITY LUIS SAN VICENTE PORTES * Montclair State University This paper explores the effect of remittances
More informationBrain drain and Human Capital Formation in Developing Countries. Are there Really Winners?
Brain drain and Human Capital Formation in Developing Countries. Are there Really Winners? José Luis Groizard Universitat de les Illes Balears Ctra de Valldemossa km. 7,5 07122 Palma de Mallorca Spain
More informationThe Costs of Remoteness, Evidence From German Division and Reunification by Redding and Sturm (AER, 2008)
The Costs of Remoteness, Evidence From German Division and Reunification by Redding and Sturm (AER, 2008) MIT Spatial Economics Reading Group Presentation Adam Guren May 13, 2010 Testing the New Economic
More informationCAN FAIR VOTING SYSTEMS REALLY MAKE A DIFFERENCE?
CAN FAIR VOTING SYSTEMS REALLY MAKE A DIFFERENCE? Facts and figures from Arend Lijphart s landmark study: Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries Prepared by: Fair
More informationThe Impact of Conflict on Trade Evidence from Panel Data
The Impact of Conflict on Trade Evidence from Panel Data Katrin Kamin 19th International Conference on Economics and Security June 2015, Grenoble Motivation [ ] the impact of peace is greater than the
More informationCorruption and business procedures: an empirical investigation
Corruption and business procedures: an empirical investigation S. Roy*, Department of Economics, High Point University, High Point, NC - 27262, USA. Email: sroy@highpoint.edu Abstract We implement OLS,
More informationBenefit levels and US immigrants welfare receipts
1 Benefit levels and US immigrants welfare receipts 1970 1990 by Joakim Ruist Department of Economics University of Gothenburg Box 640 40530 Gothenburg, Sweden joakim.ruist@economics.gu.se telephone: +46
More informationTable A.2 reports the complete set of estimates of equation (1). We distinguish between personal
Akay, Bargain and Zimmermann Online Appendix 40 A. Online Appendix A.1. Descriptive Statistics Figure A.1 about here Table A.1 about here A.2. Detailed SWB Estimates Table A.2 reports the complete set
More informationNBER WORKING PAPER SERIES THE SKILL COMPOSITION OF MIGRATION AND THE GENEROSITY OF THE WELFARE STATE. Alon Cohen Assaf Razin Efraim Sadka
NBER WORKING PAPER SERIES THE SKILL COMPOSITION OF MIGRATION AND THE GENEROSITY OF THE WELFARE STATE Alon Cohen Assaf Razin Efraim Sadka Working Paper 14738 http://www.nber.org/papers/w14738 NATIONAL BUREAU
More informationVolume 35, Issue 1. An examination of the effect of immigration on income inequality: A Gini index approach
Volume 35, Issue 1 An examination of the effect of immigration on income inequality: A Gini index approach Brian Hibbs Indiana University South Bend Gihoon Hong Indiana University South Bend Abstract This
More informationEntrepreneurs out of necessity : a snapshot
Entrepreneurs out of necessity : a snapshot Markus Poschke McGill University, Montréal QC, Canada H3A2T7 E-mail: markus.poschke@mcgill.ca August 2012 Abstract Entrepreneurs out of necessity as identified
More informationEthnic networks and trade: Intensive vs. extensive margins
MPRA Munich Personal RePEc Archive Ethnic networks and trade: Intensive vs. extensive margins Cletus C Coughlin and Howard J. Wall 13. January 2011 Online at https://mpra.ub.uni-muenchen.de/30758/ MPRA
More informationExploring the Impact of Democratic Capital on Prosperity
Exploring the Impact of Democratic Capital on Prosperity Lisa L. Verdon * SUMMARY Capital accumulation has long been considered one of the driving forces behind economic growth. The idea that democratic
More informationThe Determinants and the Selection. of Mexico-US Migrations
The Determinants and the Selection of Mexico-US Migrations J. William Ambrosini (UC, Davis) Giovanni Peri, (UC, Davis and NBER) This draft March 2011 Abstract Using data from the Mexican Family Life Survey
More informationImmigrant-native wage gaps in time series: Complementarities or composition effects?
Immigrant-native wage gaps in time series: Complementarities or composition effects? Joakim Ruist Department of Economics University of Gothenburg Box 640 405 30 Gothenburg, Sweden joakim.ruist@economics.gu.se
More informationPoverty Reduction and Economic Growth: The Asian Experience Peter Warr
Poverty Reduction and Economic Growth: The Asian Experience Peter Warr Abstract. The Asian experience of poverty reduction has varied widely. Over recent decades the economies of East and Southeast Asia
More informationREGIONAL INTEGRATION AND TRADE IN AFRICA: AUGMENTED GRAVITY MODEL APPROACH
REGIONAL INTEGRATION AND TRADE IN AFRICA: AUGMENTED GRAVITY MODEL APPROACH Edris H. Seid The Horn Economic & Social Policy Institute (HESPI) 2013 African Economic Conference Johannesburg, South Africa
More informationStrengthening Protection of Labor Rights through Preferential Trade Agreements (PTAs)
Strengthening Protection of Labor Rights through Preferential Trade Agreements (PTAs) Moonhawk Kim moonhawk@gmail.com Executive Summary Analysts have argued that the United States attempts to strengthen
More informationCrime and Corruption: An International Empirical Study
Proceedings 59th ISI World Statistics Congress, 5-3 August 13, Hong Kong (Session CPS111) p.985 Crime and Corruption: An International Empirical Study Huaiyu Zhang University of Dongbei University of Finance
More informationEurope and the US: Preferences for Redistribution
Europe and the US: Preferences for Redistribution Peter Haan J. W. Goethe Universität Summer term, 2010 Peter Haan (J. W. Goethe Universität) Europe and the US: Preferences for Redistribution Summer term,
More informationTrade, Democracy, and the Gravity Equation
Trade, Democracy, and the Gravity Equation Miaojie Yu China Center for Economic Research (CCER) Peking University, China October 18, 2007 Abstract Trading countries democracy has various e ects on their
More informationAustria. Scotland. Ireland. Wales
Figure 5a. Implied selection of return migrants, Di erence between estimated convergence Original data and occupation score coding panel sample versus the cross section, by sending country. This figure
More informationA gravity analysis of the adverse effects of U.S. sanctions and their after-life
A gravity analysis of the adverse effects of U.S. sanctions and their after-life June 2018, Department of Economics NEKN01 Master thesis I Author: Anna Ekstam Supervisor: Joakim Gullstrand Abstract Sanctions
More informationThe Effect of Economic Sanctions on Domestic Production, Trade and Transportation of Sanctioned Goods
The Effect of Economic Sanctions on Domestic Production, Trade and ation of Sanctioned Goods Misak Avetisyan a*, David Lektzian b a Texas Tech University, Department of Economics, Lubbock, TX 79409 b Texas
More informationEXPORT, MIGRATION, AND COSTS OF MARKET ENTRY EVIDENCE FROM CENTRAL EUROPEAN FIRMS
Export, Migration, and Costs of Market Entry: Evidence from Central European Firms 1 The Regional Economics Applications Laboratory (REAL) is a unit in the University of Illinois focusing on the development
More informationInternational Trade: Lecture 5
International Trade: Lecture 5 Alexander Tarasov Higher School of Economics Fall 2016 Alexander Tarasov (Higher School of Economics) International Trade (Lecture 5) Fall 2016 1 / 24 Trade Policies Chapters
More informationAn Empirical Analysis of Pakistan s Bilateral Trade: A Gravity Model Approach
103 An Empirical Analysis of Pakistan s Bilateral Trade: A Gravity Model Approach Shaista Khan 1 Ihtisham ul Haq 2 Dilawar Khan 3 This study aimed to investigate Pakistan s bilateral trade flows with major
More informationCorruption, Political Instability and Firm-Level Export Decisions. Kul Kapri 1 Rowan University. August 2018
Corruption, Political Instability and Firm-Level Export Decisions Kul Kapri 1 Rowan University August 2018 Abstract In this paper I use South Asian firm-level data to examine whether the impact of corruption
More informationLegislatures and Growth
Legislatures and Growth Andrew Jonelis andrew.jonelis@uky.edu 219.718.5703 550 S Limestone, Lexington KY 40506 Gatton College of Business and Economics, University of Kentucky Abstract This paper documents
More informationCongressional Gridlock: The Effects of the Master Lever
Congressional Gridlock: The Effects of the Master Lever Olga Gorelkina Max Planck Institute, Bonn Ioanna Grypari Max Planck Institute, Bonn Preliminary & Incomplete February 11, 2015 Abstract This paper
More informationPolitical Skill and the Democratic Politics of Investment Protection
1 Political Skill and the Democratic Politics of Investment Protection Erica Owen University of Minnesota November 13, 2009 Research Question 2 Low levels of FDI restrictions in developed democracies are
More informationA REPLICATION OF THE POLITICAL DETERMINANTS OF FEDERAL EXPENDITURE AT THE STATE LEVEL (PUBLIC CHOICE, 2005) Stratford Douglas* and W.
A REPLICATION OF THE POLITICAL DETERMINANTS OF FEDERAL EXPENDITURE AT THE STATE LEVEL (PUBLIC CHOICE, 2005) by Stratford Douglas* and W. Robert Reed Revised, 26 December 2013 * Stratford Douglas, Department
More informationDoes Trade Integration Contribute to Peace?
Review of Development Economics, 20(1), 327 344, 2016 DOI:10.1111/rode.12222 Does Trade Integration Contribute to Peace? Jong-Wha Lee and Ju Hyun Pyun* Abstract We investigate the effect of trade integration
More informationTax Competition and Migration: The Race-to-the-Bottom Hypothesis Revisited
Tax Competition and Migration: The Race-to-the-Bottom Hypothesis Revisited Assaf Razin y and Efraim Sadka z January 2011 Abstract The literature on tax competition with free capital mobility cites several
More informationWhyHasUrbanInequalityIncreased?
WhyHasUrbanInequalityIncreased? Nathaniel Baum-Snow, Brown University Matthew Freedman, Cornell University Ronni Pavan, Royal Holloway-University of London June, 2014 Abstract The increase in wage inequality
More informationTourism Growth in the Caribbean
Economic and Financial Linkages in the Western Hemisphere Seminar organized by the Western Hemisphere Department International Monetary Fund November 26, 2007 Tourism Growth in the Caribbean Prachi Mishra
More informationDemocratic Tipping Points
Democratic Tipping Points Antonio Ciccone March 2018 Barcelona GSE Working Paper Series Working Paper nº 1026 Democratic Tipping Points Antonio Ciccone March 2018 Abstract I examine whether transitory
More informationThe Role of Income and Immigration Policies in Attracting International Migrants
D I S C U S S I O N P A P E R S E R I E S IZA DP No. 6655 The Role of Income and Immigration Policies in Attracting International Migrants Francesc Ortega Giovanni Peri June 2012 Forschungsinstitut zur
More informationDeterminants of Corruption: Government E ectiveness vs. Cultural Norms y
Determinants of Corruption: Government E ectiveness vs. Cultural Norms y Mudit Kapoor and Shamika Ravi Indian School of Business, India 15th July 2009 Abstract In this paper we show that parking behavior
More informationIncumbency Advantages in the Canadian Parliament
Incumbency Advantages in the Canadian Parliament Chad Kendall Department of Economics University of British Columbia Marie Rekkas* Department of Economics Simon Fraser University mrekkas@sfu.ca 778-782-6793
More informationTrade led Growth in Times of Crisis Asia Pacific Trade Economists Conference 2 3 November 2009, Bangkok. Session 11
Trade led Growth in Times of Crisis Asia Pacific Trade Economists Conference 2 3 November 2009, Bangkok Session 11 Revisiting Trade-Institution Nexus: A Comparative Analysis of South Asia and Global Commodity
More informationDoes Learning to Add up Add up? Lant Pritchett Presentation to Growth Commission October 19, 2007
Does Learning to Add up Add up? Lant Pritchett Presentation to Growth Commission October 19, 2007 Five Issues, Some with Evidence I) Why aggregate data at all? II) Education and long-run growth: Can Jones
More informationECON 450 Development Economics
ECON 450 Development Economics Long-Run Causes of Comparative Economic Development Institutions University of Illinois at Urbana-Champaign Summer 2017 Outline 1 Introduction 2 3 The Korean Case The Korean
More informationThe Determinants of Sanction Threats and the Use of Coercive Economic Statecraft
The Determinants of Sanction Threats and the Use of Coercive Economic Statecraft William Seitz Work in Progress This Version: 28 February, 2013 In this study, I investigate several determinants of the
More informationWorking Papers in Economics
University of Innsbruck Working Papers in Economics Foreign Direct Investment and European Integration in the 90 s Peter Egger and Michael Pfaffermayr 2002/2 Institute of Economic Theory, Economic Policy
More informationChina s (Uneven) Progress Against Poverty. Martin Ravallion and Shaohua Chen Development Research Group, World Bank
China s (Uneven) Progress Against Poverty Martin Ravallion and Shaohua Chen Development Research Group, World Bank 1 Around 1980 China had one of the highest poverty rates in the world We estimate that
More informationTrading Goods or Human Capital
Trading Goods or Human Capital The Winners and Losers from Economic Integration Micha l Burzyński, Université catholique de Louvain, IRES Poznań University of Economics, KEM michal.burzynski@uclouvain.be
More informationRain and the Democratic Window of Opportunity
Rain and the Democratic Window of Opportunity by Markus Brückner and Antonio Ciccone* 4 February 2008 Abstract. According to the economic approach to political transitions, negative transitory economic
More informationSouthern Africa Labour and Development Research Unit
Southern Africa Labour and Development Research Unit Drivers of Inequality in South Africa by Janina Hundenborn, Murray Leibbrandt and Ingrid Woolard SALDRU Working Paper Number 194 NIDS Discussion Paper
More informationExtended Families across Mexico and the United States. Extended Abstract PAA 2013
Extended Families across Mexico and the United States Extended Abstract PAA 2013 Gabriela Farfán Duke University After years of research we ve come to learn quite a lot about household allocation decisions.
More informationThe erosion of colonial trade linkages after independence
The erosion of colonial trade linkages after independence Keith Head 1, Thierry Mayer 2, John Ries 3 Abstract Most independent nations today were part of empires in 1945. Using bilateral trade data from
More informationShake Hands or Shake Apart? Pre-war Global Trade and Currency. Blocs: the Role of the Japanese Empire
HEI Working Paper No: 05/2006 Shake Hands or Shake Apart? Pre-war Global Trade and Currency Blocs: the Role of the Japanese Empire Toshihiro Okubo Graduate Institute of International Studies Abstract Despite
More informationDoes Cultural Distance Hinder Trade in Goods? A Comparative Study of Nine OECD Member Nations
Open Econ Rev DOI 10.1007/s11079-008-9090-8 RESEARCH ARTICLE Does Cultural Distance Hinder Trade in Goods? A Comparative Study of Nine OECD Member Nations Bedassa Tadesse & Roger White # Springer Science
More informationMigration and Regional Trade Agreement: a (new) Gravity Estimation
Migration and Regional Trade Agreement: a (new) Gravity Estimation Abstract This paper investigates the role of Regional Trade Agreements (RTAs) on bilateral international migration. Building on the gravity
More informationRural and Urban Migrants in India:
Rural and Urban Migrants in India: 1983-2008 Viktoria Hnatkovska and Amartya Lahiri July 2014 Abstract This paper characterizes the gross and net migration flows between rural and urban areas in India
More informationUniversity of Hawai`i at Mānoa Department of Economics Working Paper Series
University of Hawai`i at Mānoa Department of Economics Working Paper Series Saunders Hall 542, 2424 Maile Way, Honolulu, HI 96822 Phone: (808) 956-8496 www.economics.hawaii.edu Working Paper No. 16-6 Ban
More informationDemocracy and government spending
MPRA Munich Personal RePEc Archive Democracy and government Pavlos Balamatsias 6 March 2018 Online at https://mpra.ub.uni-muenchen.de/86905/ MPRA Paper No. 86905, posted 23 May 2018 19:21 UTC Democracy
More informationContiguous States, Stable Borders and the Peace between Democracies
Contiguous States, Stable Borders and the Peace between Democracies Douglas M. Gibler June 2013 Abstract Park and Colaresi argue that they could not replicate the results of my 2007 ISQ article, Bordering
More informationInternational Trade 31E00500, Spring 2017
International Trade 31E00500, Spring 2017 Lecture 10: O shoring, Import Competition and Labor Markets Katariina Nilsson Hakkala February 2nd, 2017 Nilsson Hakkala (Aalto and VATT) Internalization, O shoring
More informationThe Integer Arithmetic of Legislative Dynamics
The Integer Arithmetic of Legislative Dynamics Kenneth Benoit Trinity College Dublin Michael Laver New York University July 8, 2005 Abstract Every legislature may be defined by a finite integer partition
More informationAppendix: Regime Type, Coalition Size, and Victory
Appendix: Regime Type, Coalition Size, and Victory Benjamin A. T. Graham Erik Gartzke Christopher J. Fariss Contents 10 Introduction to the Appendix 2 10.1 Testing Hypotheses 1-3 with Logged Partners....................
More informationThis is a repository copy of Threat and imposition of economic sanctions : Updating the TIES dataset.
This is a repository copy of Threat and imposition of economic sanctions 1945 2005: Updating the TIES dataset. White Rose Research Online URL for this paper: http://eprints.whiterose.ac.uk/126201/ Version:
More informationEmigration and source countries; Brain drain and brain gain; Remittances.
Emigration and source countries; Brain drain and brain gain; Remittances. Mariola Pytliková CERGE-EI and VŠB-Technical University Ostrava, CReAM, IZA, CCP and CELSI Info about lectures: https://home.cerge-ei.cz/pytlikova/laborspring16/
More informationThe Analytics of the Wage Effect of Immigration. George J. Borjas Harvard University September 2009
The Analytics of the Wage Effect of Immigration George J. Borjas Harvard University September 2009 1. The question Do immigrants alter the employment opportunities of native workers? After World War I,
More informationECIPE PRESENTATION» EUROPEAN SANCTIONS: PERSPECTIVES ON TRADE & POWER
ECIPE PRESENTATION» 20. 10. 2011 EUROPEAN SANCTIONS: PERSPECTIVES ON TRADE & POWER PRESENTATION FOR THE PROGRESS FOUNDATION Hosuk Lee-Makiyama Director, European Centre for International Political Economy
More informationLONG RUN GROWTH, CONVERGENCE AND FACTOR PRICES
LONG RUN GROWTH, CONVERGENCE AND FACTOR PRICES By Bart Verspagen* Second draft, July 1998 * Eindhoven University of Technology, Faculty of Technology Management, and MERIT, University of Maastricht. Email:
More informationReevaluating the modernization hypothesis
Reevaluating the modernization hypothesis The MIT Faculty has made this article openly available. Please share how this access benefits you. Your story matters. Citation As Published Publisher Acemoglu,
More informationNBER WORKING PAPER SERIES THE EFFECT OF IMMIGRATION ON PRODUCTIVITY: EVIDENCE FROM US STATES. Giovanni Peri
NBER WKG PER SEES THE EFFE OF IMGRATION ON PRODUIVITY: EVEE FROM US STATES Giovanni Peri Working Paper 15507 http://www.nber.org/papers/w15507 NATION BUREAU OF ENOC RESECH 1050 Massachusetts Avenue Cambridge,
More informationDo Individual Heterogeneity and Spatial Correlation Matter?
Do Individual Heterogeneity and Spatial Correlation Matter? An Innovative Approach to the Characterisation of the European Political Space. Giovanna Iannantuoni, Elena Manzoni and Francesca Rossi EXTENDED
More informationTHE ECONOMIC EFFECT OF CORRUPTION IN ITALY: A REGIONAL PANEL ANALYSIS (M. LISCIANDRA & E. MILLEMACI) APPENDIX A: CORRUPTION CRIMES AND GROWTH RATES
THE ECONOMIC EFFECT OF CORRUPTION IN ITALY: A REGIONAL PANEL ANALYSIS (M. LISCIANDRA & E. MILLEMACI) APPENDIX A: CORRUPTION CRIMES AND GROWTH RATES Figure A1 shows an apparently negative correlation between
More informationThe Trade Creation Effect of Immigrants: Testing the Theory on the Remarkable Case of Spain
The Trade Creation Effect of Immigrants: Testing the Theory on the Remarkable Case of Spain Giovanni Peri (UC Davis, CESifo and NBER) Francisco Requena (Universitat de Valencia) June, 2009 Abstract There
More informationDollar Diplomacy. When Do Sanctions Work? Maynard Malixi 4/18/2016
Dollar Diplomacy When Do Sanctions Work? Maynard Malixi 4/18/2016 Contents Introduction... 2 Literature Review... 3 High Issue Saliency... 7 When Threat to State Existence is High - Pakistan... 8 When
More informationOn the determinants of fiscal centralization: Theory and evidence
Journal of Public Economics 74 (1999) 97 139 On the determinants of fiscal centralization: Theory and evidence Ugo Panizza* Office of the Chief Economist, Inter-American Development Bank, Stop W-0436,
More information