Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/222941 
Year of Publication: 
2020
Series/Report no.: 
Kiel Working Paper No. 2160
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
How do exporting firms react to sanctions? Specifically, which firms are willing - or capable - to serve the market of a sanctioned country? We investigate this question for four sanctions episodes drawing on recent econometric advances in bias-corrected dynamic high-dimensional fixed effects binary choice estimators and monthly data on the universe of French exporting firms. We find that the introduction of new sanctions significantly lowers firm-level probabilities of serving the sanctioned markets, while, importantly, the lifting of sanctions is not found to yield symmetric trade recovery effects. Additionally, sanctions effects are very heterogeneous. Firms that depend more on trade finance instruments are more strongly affected, while prior experience in the sanctioned country considerably softens the blow of sanctions, and firms can be partly immune to the sanctions effect if they are specialized in serving "crisis countries". Finally, we find suggestive evidence for sanction avoidance by exporting indirectly via neighboring countries.
Subjects: 
sanctions
trade
foreign policy
extensive margin
firm behaviour
JEL: 
F51
F14
F13
F52
Document Type: 
Working Paper

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