On The Design of Effective Sanctions: The Case of Bans on Exports to Russia
Ricardo Hausmann, Ulrich Schetter, and Muhammed A. Yıldırım of Harvard Kennedy School analyze the effects of bans on exports at the level of 5,000 products and show how their results can inform economic sanctions against Russia after its invasion of Ukraine. They begin with characterizing export restrictions imposed by the EU and the US until mid May 2022. They then propose a theoretically-grounded criterion for targeting export bans at the 6-digit HS level. Their results show that the costs to Russia are highly convex in the market share of the sanctioning parties, i.e., there are large benefits from coordinating export bans among a broad coalition of countries. Applying their results to Russia, they find that sanctions imposed by the EU and the US are not systematically related to their arguments once they condition on Russia’s total imports of a product from participating countries. Quantitative evaluations of the export bans show:
(i) that they are very effective with the welfare loss typically ∼100 times larger for Russia than for the sanctioners;
(ii) Improved coordination of the sanctions and targeting sanctions based on their criterion allows to increase the costs to Russia by about 60% with little to no extra cost to the sanctioners; and
(iii) There is scope for increasing the cost to Russia further by expanding the set of sanctioned products.
Their full working paper can be downloaded below:
Ricardo Hausmann is the founder and director of Harvard’s Growth Lab and the Rafik Hariri Professor of the Practice of International Political Economy at Harvard Kennedy School.
Ulrich Schetter joined Harvard's Center for International Development’s Growth Lab as a postdoctoral fellow in 2019.
Muhammed A. Yıldırım
Muhammed A. Yıldırım is an assistant professor of economics at Koç University in Istanbul, as well as the research director for the Growth Lab at Harvard's Center for International Development.