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- Title
Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment?<sup>1</sup> Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment?
- Authors
LEKTZIAN, DAVID; BIGLAISER, GLEN
- Abstract
Complementing the effectiveness of US sanctions debate, the US government often prods US investors to disinvest from targeted countries, hoping to pressure sanctioned countries to back US foreign policy goals or face economic costs for their actions. Missing from the effectiveness of sanctions debate is the impact US sanctions have on third-party foreign direct investment (FDI). Using panel data for 171 countries from 1969 to 2000, we present the first empirical study on the effect of sanctions on global FDI. We find strong evidence that when US firms disinvest during US sanctions, global FDI significantly increases, providing the target country with a reliable source of capital replacement. The results suggest the limited effectiveness of sanctions for restricting capital flows to targeted countries and that US firms may ultimately bear the highest costs from US-imposed sanctions.
- Subjects
AMERICAN economic sanctions; FOREIGN investments; INVESTMENTS; ECONOMIC sanctions; ECONOMIC policy; INTERNATIONAL relations; FOREIGN relations of the United States
- Publication
International Studies Quarterly, 2013, Vol 57, Issue 1, p65
- ISSN
0020-8833
- Publication type
Article
- DOI
10.1111/j.1468-2478.2012.00761.x