Monday, May 15th 2017 –  13:00 – 14:00

Maison des Sciences Économiques, Room 19

 Maison des Sciences Économiques, 106-112 bd de l’Hôpital, 75013 Paris, Métro 5 Campo Formio, bus 57, 67, 27, 83 ou 47

Evgenii Monastyrenko
(PhD candidate, PSE)
with Julian HINZ (Kiel Institute for the World Economy)
Bearing the Cost of Politics: Consumer Prices and Welfare in Russia

Abstract – In August 2014 the Russian Federation implemented an embargo on select food and agricultural imports originating from the European Union, United States, Australia, Canada and Norway. The measure was designed to be the response to economic sanctions against Russia by harming foreign producers of the targeted products. We aim to estimate the consequences of such abrupt restrictions on international trade for consumer prices and welfare in Russia. We employ detailed monthly data on consumer prices in Russia between 2011 and 2016 at different administrative levels. A simple difference-in-differences approach suggests that self-imposed embargo induced a well-predictable rise in the prices of targeted goods in the short run. Regions of Russia with previously above-average levels of food imports from sanctioned countries experienced a stronger impact. In the medium run imports from other sources replaced previous imports from embargoed countries and in the long run – after one year – domestic production significantly diminished the initial price surge. Meanwhile, a time trend in non-targeted goods suggests that their prices have been also altered. We hypothesize that the policy shock is translated to non-targeted sectors by means of input-output production linkages. We further quantify the outcomes of embargo using a Ricardian model with sectoral linkages, trade in intermediate goods and sectoral heterogeneity in production.

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