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Vortragende Person/Vortragende Personen:
Jamila Nigmatulina (HEC Lausanne)

Sanctions and Misallocation. How Sanctioned Firms Won and Russia Lost.

Abstract: Using a unique natural experiment of staggered firm-level sanctions against Russia in 2014-2020 and the data on over 600,000 Russian firms, I estimate the effect of sanctions on targeted firms and on the aggregate economy. Surprisingly, sanctioned firms on average gained 38% more capital inputs after sanctions relative to the industry trends. Using additional data on subsidies and government contracts, I find that this result is explained by the government protection of targeted firms, that more than compensated for the negative sanctions shock. However, the sanctioned firms were already too large and had too much capital prior to sanctions, I show with a heterogeneous firm framework. The joint effect of sanctions and government protection reallocated capital even more towards the targets. I combine the causal estimates with the heterogeneous firm framework and estimate that government protection of connected firms from the negative shock made the Russian TFP drop at least by 0.33% reaching 3% in relevant sectors, despite the sanctioned firms benefiting.

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