The economic consequences of sanctions

Hillingdon, Anna Yeganeh

Abstract

This thesis focuses on the redistribution of the economic costs of sanctions, utilising formal modelling techniques. The main contribution of this work lies in its analysis of cost transfer and the collateral damages caused by sanctions. In Chapter 1, the thesis demonstrates how the sender of sanctions can transfer its costs to a third party, describing this transfer as intended collateral damage. It also characterises the competition between regional rivals, with one acting as the target of sanctions, using a Contest Success Function (CSF). Additionally, the chapter introduces asymmetric marginal costs for the players, generalising Baik’s (1994) model and extending the specification of the contestants’ payoffs.
Chapter 2 combines network centrality methodology with the concept of Nash equilibrium. It shows that, despite attempts to evade sanctions, these measures reduce the target's optimal activity level (its "energy") at the Nash equilibrium. Furthermore, the chapter highlights how sanctions create opportunities for opportunistic behaviour, reduce the centrality of the sender's trading partners (or "friends"), and affect the entire network by either harming an ally or benefiting a neutral nation.
Chapter 3 explores the Social Welfare Function (SWF) in both the sender and recipient countries, demonstrating that the presence of even a single neutral country causes a decrease in the SWF of both the originating and recipient countries. The analysis reveals that a slight increase in per-unit production costs has a more significant impact on reducing consumer surplus than a decrease in the number of firms. At the firm level, it shows that the loss caused by an increase in production costs (such as the removal of a primary producer) is greater than the gain resulting from a reduction in the number of firms. Lastly, the chapter argues that the withdrawal of international firms can benefit non-frontier firms in the target country by reducing competition.

Citation

Hillingdon, A. Y. The economic consequences of sanctions. (Thesis). SOAS University of London

• Thesis Type: Thesis
• Deposit Date: May 20, 2025
• Publicly Available Date: May 20, 2025
• DOI: https://doi.org/10.25501/SOAS.00463495
• Additional Information: 173 pages
• Award Date: Jan 1, 2025