Economic Sanctions and Export Margins

ABSTRACT As global integration has increased over time, so too has the use of economic sanctions as a policy tool. Sanctions have the potential to affect trade flows regardless of other intended objectives. We use a gravity model framework and the updated Global Sanctions Data Base to characterize the heterogeneous response of exports to various types of sanctions. Specifically, we use disaggregated product‐level trade flows for 247 countries over the period 1962–2019 and focus primarily on exporter and importer sanctions. We extend the literature by showing that, when looking separately at the extensive and intensive margins of trade, complete sanctions have the strongest impact on the extensive margin, while partial sanctions matter most for the intensive margin. We also explore whether the effects of sanctions are anticipated and/or persist over time, and we find some evidence of both effects. We further add to the existing literature by using quantile regression in a panel data context with fixed effects to allow for heterogeneity in the impact of sanctions on trade margins. We find that complete sanctions disproportionately reduce exports for countries with low initial export volume, while partial sanctions are more likely to reduce exports in countries with high initial export volume.