Economics Dictionary of ArgumentsHome
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| Sanctions theory: Sanctions theory in economics examines how and why economic sanctions are used as a foreign policy tool. It analyzes their mechanisms, effectiveness, and consequences, considering factors like the target country's vulnerability, the scope of sanctions (trade, financial, etc.), and the unity of the imposing coalition. The theory also explores optimal sanction design to achieve specific political or behavioral changes. See also Sanctions, Sanctions effectiveness, Sanctions debate, Sanctions consequences, Sanctions objectives._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Constantinos Syropoulos on Sanctions Theory - Dictionary of Arguments
Morgan I 13 Sanctions Theory/Morgan/Syropoulos/Yotov: From a methodological perspective, many studies aiming to estimate the impact of sanctions on target states face problems of endogeneity in the following sense: events that instigate the sanctioning of target countries - for example, civil or interstate conflicts or violations of human rights - may also shape the economic effects we observe. Surprisingly, much of the extant literature has bypassed this issue. Gutmann, Neuenkirch, and Neumeier (2020)(1) and Kwon, Syropoulos, and Yotov (2022a)(2) are recent exceptions. Capitalizing on certain dimensions of sanctions, these studies have addressed the issue of endogeneity; for example, by considering flexible instruments related to laws and regulations in sanctioning states that are independent of events in sanctioned states. It is important for future studies of the effects of sanctions to recognize the endogeneity problem and tackle it directly, either with existing methods or with new strategies. So far, interest among academics in the impact of economic sanctions on senders has been limited, perhaps because this impact tends to be relatively small. A possible explanation for relative disinterest may rest in the fact that the economies of most sanctioning states are considerably larger than the economies of the targeted states, which tends to weaken bilateral economic dependence. Moreover, in most cases, senders that are threatened with reciprocal countersanctions can divert economic activity toward third, nonsanctioned states. Morgan I 14 In addition, senders may design and/or implement sanctions with a view toward minimizing, or at least mitigating, the possibly adverse impact of sanctions on their constituencies. The current sanctions on Russia are a prominent example: some countries decided not to impose sanctions on it, and others failed to enforce their declared sanctions fully. Naturally, sender efforts to minimize their own costs raise deep questions about the effectiveness, enforcement, and credibility of their sanctions policies (Lektzian and Sprecher 2007)(3). Despite the eagerness and ability of senders to minimize the negative impact of sanctions on their own economies, recent quantitative analyses provide some evidence for the presence of such negative effects due to significantly decreased economic activities between senders and targets (Besedeš, Goldbach, and Nitsch 2021)(4). Nonetheless, these effects do not translate into a significant impact on senders due to several factors, including the intensified economic relationships among sanctioning and nonsanctioned countries (often called “trade diversion”), the disproportionate size between the primary sanctioners and targeted states, and the possible backsliding by some sender countries in a sanctioning coalition. Thus, consistent with the earlier literature (for example, Farmer 2000(5)), recent evidence suggests that the impact of sanctions on sender states tends to be small and short-lived. However, this does not necessarily imply that the costs of sanctions to senders would be small if the targets are economically large and powerful. Notwithstanding the limited impact of sanctions on senders, we see several promising directions for future work in this area. First, from a methodological perspective, the ability of senders to select an optimal mix of sanction tools and to design sanctions in a way that maximizes the economic damage on targets while minimizing the cost on the senders should be a key feature of theoretical models on sanctions. A second direction that may be interesting to explore, both theoretically and empirically, is related to the possibility that senders may issue “fake” sanctions based on political pronouncements aiming to camouflage their economic motives. Thus, the imposition of sanctions may be intended to provide gains for the sender rather than to fulfill the declared political objectives of sanctioning. This story is also consistent with the notion that sanctions may be issued to serve the interests of specific interest groups (Kaempfer and Lowenberg 2007)(6). Third, the cost of sanctions among members in coalitions of senders may be shared disproportionately. This suggests a role for the adoption of reliable redistributional mechanisms within sender coalitions aimed at sharing the burden of sanctions, with implications for improvements in the design, implementation, and effectiveness of multilateral sanctions. In addition to affecting senders and targets, sanctions may also affect third countries. Although these effects have been examined by policymakers and covered extensively in the media, they have attracted relatively little attention in the academic literature. One can identify two distinct and opposing channels through which sanctions may affect third countries: (1) the “extraterritorial” channel, which is a direct channel that normally transmits an adverse effect on third countries; and (2) the “general equilibrium” channel, which is an indirect channel through which sanctions generate (usually) positive effects on third countries. Morgan I 15 Equilibrium: The intuition behind the general equilibrium effects of sanctions and their impact on third countries is familiar and easy to understand. Economic activities that are disrupted by sanctions can intensify commercial, financial, and other relationships with third countries that serve as a substitute for forgone business opportunities. For example, after the imposition of sanctions on Russia in 2022, imports of Russian oil by India and China soared. These effects can be quantified, because the economics literature has developed tools to capture such general equilibrium effects (Haidar 2017(7); Besedeš, Goldbach, and Nitsch 2021(4)). >Sanctions, >Sanctions consequences, >Sanctions debate, >Sanctions effectiveness, >Sanctions evasion, >Sanctions history, >Sanctions policies, >Sanctions theory, >Trade sanctions, >Financial sanctions. 1. Gutmann, Jerg, Matthias Neuenkirch, and Florian Neumeier. 2020. “Precision-Guided or Blunt? The Effects of US Economic Sanctions on Human Rights.” Public Choice 185 (1-2): 161–82. Haidar, Jamal I. 2017. “Sanctions and Export Deflection: Evidence from Iran.” Economic Policy 32 (90): 319–55. 2. Kwon, Ohyun, Constantinos Syropoulos, and Yoto V. Yotov. 2022a. “Do Sanctions Affect Growth?” Drexel University, School of Economics Working Paper Series 2022-6. 3. Lektzian, David J., and Christopher M. Sprecher. 2007. “Sanctions, Signals, and Militarized Conflict,” American Journal of Political Science 51 (2): 415–31. 4. Besedeš, Tibor, Stefan Goldbach, and Volker Nitsch. 2021. “Cheap Talk? Financial Sanctions and Nonfinancial Firms.” European Economic Review 134: 103688. 5. Farmer, Richard D. 2000. “Costs of Economic Sanctions to the Sender.” World Economy 23 (1): 93–117. 6. Kaempfer, William H. and Anton D. Lowenberg. 2007. “The Political Economy of Economic Sanctions.” In Handbook of Defense Economics, Vol. 2, edited by Todd Sandler and Keith Hartley, 867–911. Amsterdam: Elsevier. 7. Haidar, Jamal I. 2017. “Sanctions and Export Deflection: Evidence from Iran.” Economic Policy 32 (90): 319–55._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Syropoulos, Constantinos Morgan I T. Clifton Morgan Constantinos Syropoulos Yoto V. Yotov, "Economic Sanctions: Evolution, Consequences, and Challenges." Journal of Economic Perspectives 37 (1): 3–30. 2023 |
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