Trade and Development Seminar with Ebad Ebadi, PhD candidate, George Washington University

How do targeted firms respond to international trade sanctions? While the macroeconomic effect of trade sanctions has been extensively studied, little is known about how trade sanctions shape firm dynamics and their heterogeneous effects in a targeted country. Exploring detailed Iranian manufacturing firm surveys, I examine firm-level asymmetric effects of the 2012-2013 U.S. and EU trade sanctions against Iran due to Iran’s nuclear program. Empirical analysis shows that the sanctions cut Iranian firms’ exports in half and imports by over 30 percent and, on average, reduced firm-level productivity, profit, revenue, and employment. However, intriguingly, exporting firms were found to mitigate negative effects of sanctions through increased presence in the domestic market, transferring sanction shocks to non-exporting firms. At the same time, importing firms responded to sanctions by sourcing more domestic inputs at the expense of non-importing firms. Based on a stylized model featuring heterogeneous firms with capacity constraints, I show that the export sanctions increased consumer welfare by 4.35 percent with decreasing domestic prices for a given income level. In contrast, import sanctions led to a 7.5 percent consumer welfare loss by increasing prices. The stylized model implies alleviating exporting firm capacity constraints during adverse trade shocks increases positive impacts through export channels. 

Ebad's Website

Please contact Ebad directly ([email protected]) if you would like to meet with him.

Seminar will be held Virtually. Zoom link = https://gwu-edu.zoom.us/j/96404965995

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