Are export sanctions effective?
Different countries impose export sanctions. Whether these sanctions are effective depends on their goal. This policy brief highlights that, if the goal of export sanctions is to reduce total exports of the targeted country, export sanctions may be less effective as exporters can redirect their exports from one export destination to another. However, if the goal of export sanctions is to put pressure on exporters in the targeted country, then export sanctions can be effective as exporters incur welfare losses while deflecting exports to new destinations.
- small exporters were more affected by sanctions than large exporters
- larger and more experienced exporters had a higher probability to redirect more of their exports than smaller exporters
- the decision to redirect exports is not random at the exporter-level; exporters exercised product selection while redirecting exports. Precisely, they tended to redirect their core-competence products as well as products that are easier to find consumers for - homogeneous products compared to differentiated products
- exporters reduced product prices when they redirected exports to new markets
- exporters redirected exports to destinations that they already existed in before sanctions
- as well as to destinations that are "politically-friendly" to Iran