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Worth the pain?
(2021)
How do exporting firms react to sanctions? Specifically, which firms are willing — or capable — to serve the market of a sanctioned country? We investigate this question for four sanctions episodes using monthly data on the universe of French exporting firms. We draw on recent econometric advances in the estimation of dynamic fixed effects binary choice models. We find that the introduction of new sanctions in Iran and Russia significantly lowered firm-level probabilities of serving these sanctioned markets, while the (temporary) lifting of the U.S. sanctions on Cuba and the removal of sanctions against Myanmar had no or only small trade-inducing effects, respectively. Additionally, the impact of sanctions is very heterogeneous along firm dimensions and by case particularities. Firms that depend more on trade finance instruments are more strongly affected, while prior experience in the sanctioned country considerably softens the blow of sanctions, and firms can be partly immune to the sanctions effect if they are specialized in serving “crisis countries”. Finally, we find suggestive evidence for sanctions avoidance by exporting indirectly via neighboring countries.
This book deals with the inner life of the capitalist firm. There we find numerous conflicts, the most important of which concerns the individual employment relationship which is understood as a principal-agent problem between the manager, the principal, who issues orders that are to be followed by the employee, the agent. Whereas economic theory traditionally analyses this relationship from a (normative) perspective of the firm in order to support the manager in finding ways to influence the behavior of the employees, such that the latter – ideally – act on behalf of their superior, this book takes a neutral stance. It focusses on explaining individual behavioral patterns and the resulting interactions between the actors in the firm by taking sociological, institutional, and above all, psychological research into consideration. In doing so, insights are gained which challenge many assertions economists take for granted.