Do sanctions spell disaster? Economic sanctions, political institutions, and technological safety

Abstract

Sanctions restrict or terminate economic relations between two or more countries, directly and negatively influencing sanctioned countries’ companies. We argue that sanctions are similar to recessions—both reduce economic activity in affected countries. Less economic activity results in a lower accident risk as companies use their productive facilities less. Reduced revenues also force companies to adjust by cutting costs, which includes spending on safety. Hence, accident damage should increase under sanctions. Governments can intervene by enforcing safety regulations, and their incentives to do so are stronger in democracies, where citizens can more easily remove politicians from office. Therefore, accident damage increases only in nondemocratic countries, while democracies succeed in maintaining technological safety and hence sanctions do not affect accident damage.