Do Sanctions Cause Economic Growth Collapses?

Abstract

This chapter explores whether economic sanctions are able to trigger sudden economic growth collapses. The primarily aim of economic sanctions is to cause a political or behavioural change by imposing serious restrictions on important economic activities undertaken by the target country. In particular, the basic idea is that sanctions cause a large adverse and sudden shock to the target’s economy. It assumes that when this shock is severe enough, the target country is more willing to cooperate. The findings reported in this chapter clearly demonstrate that economic sanctions have a significant positive effect on the likelihood of a growth deceleration in the first three years after the first threat signals or actual imposition. It turns out that not all sanctions are equally successful in creating a sudden economic shock. In particular, trade sanctions, multilateral sanctions, and sanctions aimed at the business sector are the most harmful for the economy of the target country.

Government revenue composition and forest loss: A cross‐national study of low‐ and middle‐income nations

“…Finally, a low‐ or middle‐income income nation may not be able to raise revenues to finance itself (Milliken and Krause 2002). This tends to be the result of economic sanctions (Splinter and Klomp 2021) or civil war (Doornbos 2002). When this is the case, the social contract tends to be nonexistent because the government cannot deliver minimal public services (Ismail 2016).…”

The human consequences of economic sanctions

“…Splinter and Klomp (2021) also evaluate the growth effects of international sanctions, but rather than try to identify a linear effect on the growth rate, they focus on the possibility that sanctions trigger turning points in growth episodes. Concretely, they study whether sanctions generate collapses in economic activity, which they define as growth decelerations where average annual growth falls by 2.0% or more for at least four years and in which there is a decline in absolute per capita GDP.…”