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FDI and sanctions : An empirical analysis of short- and long-run effects

Mirkina, Irina LU (2018) In European Journal of Political Economy 54. p.198-225
Abstract

Although the relationship between trade and the success of international sanctions has been a topic of many debates in political economy over the past 30 years, the effect of sanctions on foreign direct investment (FDI) is still largely unexplored. Using the data for 184 countries from 1970 to 2010 and bias-corrected estimators, this study tests the effect of sanction imposition on foreign investment. I find that the effect of sanctions on foreign investment indeed changes over time, depending on sanction costs, primary sanction imposer, and decade. High-cost sanctions lead to a significant decrease in FDI in the short run, although they do not have a long-run effect. In many sanctions episodes in the 1990s, FDI has been negatively... (More)

Although the relationship between trade and the success of international sanctions has been a topic of many debates in political economy over the past 30 years, the effect of sanctions on foreign direct investment (FDI) is still largely unexplored. Using the data for 184 countries from 1970 to 2010 and bias-corrected estimators, this study tests the effect of sanction imposition on foreign investment. I find that the effect of sanctions on foreign investment indeed changes over time, depending on sanction costs, primary sanction imposer, and decade. High-cost sanctions lead to a significant decrease in FDI in the short run, although they do not have a long-run effect. In many sanctions episodes in the 1990s, FDI has been negatively affected in the short run, although this effect has partially dissipated in the long run. Sanctions episodes from other decades, on average, did not have a significant effect on foreign investment.

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Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Coercion, Common correlated effects estimator, Economic sanctions, Foreign direct investment, Synthetic controls method
in
European Journal of Political Economy
volume
54
pages
198 - 225
publisher
Tranfer Verlag, Regensburg, FRG
external identifiers
  • scopus:85048173348
ISSN
0176-2680
DOI
10.1016/j.ejpoleco.2018.05.008
language
English
LU publication?
yes
id
a47f3e83-7f76-48d2-afcf-727d2c320687
date added to LUP
2018-06-21 16:07:38
date last changed
2022-04-25 07:57:21
@article{a47f3e83-7f76-48d2-afcf-727d2c320687,
  abstract     = {{<p>Although the relationship between trade and the success of international sanctions has been a topic of many debates in political economy over the past 30 years, the effect of sanctions on foreign direct investment (FDI) is still largely unexplored. Using the data for 184 countries from 1970 to 2010 and bias-corrected estimators, this study tests the effect of sanction imposition on foreign investment. I find that the effect of sanctions on foreign investment indeed changes over time, depending on sanction costs, primary sanction imposer, and decade. High-cost sanctions lead to a significant decrease in FDI in the short run, although they do not have a long-run effect. In many sanctions episodes in the 1990s, FDI has been negatively affected in the short run, although this effect has partially dissipated in the long run. Sanctions episodes from other decades, on average, did not have a significant effect on foreign investment.</p>}},
  author       = {{Mirkina, Irina}},
  issn         = {{0176-2680}},
  keywords     = {{Coercion; Common correlated effects estimator; Economic sanctions; Foreign direct investment; Synthetic controls method}},
  language     = {{eng}},
  month        = {{01}},
  pages        = {{198--225}},
  publisher    = {{Tranfer Verlag, Regensburg, FRG}},
  series       = {{European Journal of Political Economy}},
  title        = {{FDI and sanctions : An empirical analysis of short- and long-run effects}},
  url          = {{http://dx.doi.org/10.1016/j.ejpoleco.2018.05.008}},
  doi          = {{10.1016/j.ejpoleco.2018.05.008}},
  volume       = {{54}},
  year         = {{2018}},
}