Do International Sanctions Reduce Household and Government Consumption in Developing Countries?

Abstract

AbstractThis paper uses a panel of 30 developing countries over the 1996‐2015 period to study the effect that international sanctions have on household and government consumption in target countries. I use a broad set of sanctions covering different aspects of sanctions. The panel model estimates show that sanctions have heterogeneous effect on household and government consumption. Household consumption responds significantly negative to noneconomic sanctions. Government consumption, in contrast, is negatively associated with intensity of sanctions, economic sanctions, plurilaterial sanctions, EU sanctions and U.S. sanctions. Disaggregating government consumption reveals that the intensity of sanctions increases government expenditure on subsidies and transfers, while government expenditure on goods and services is not correlated with sanctions. With regard to health outcomes, there is no clear evidence that sanctions are significantly associated with either life expectancy or infant mortality in target countries.