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Document Abstract
Published: 2016

Are export sanctions effective?

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Export sanctions continue to be used by countries while attempting to change the behavior of other governments, and, they still surface at the center of current policy debates when it comes to Iran. However, we still lack complete understanding about the impact and effectiveness of export sanctions.

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.

Policy makers also need to be aware of who is affected more by export sanctions and how exports redirection typically happens following export sanctions. New research also informs that:
  • 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

 

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Authors

J.I. Haidar

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