The impact of sanctions on household welfare and employment in Iran

ABSTRACT

Wide-ranging US sanctions against Iran in the past decade were in large part imposed to harm the living standards of ordinary Iranians in the hope that their leaders would submit to US demands to limit their nuclear program. In this study, I use extensive survey data to assess the impact of sanctions on household consumption and employment. Unsurprisingly, reduction in Iran's export of oil, which dealt a large negative blow to the economy, reduce household expenditures across income strata, raising poverty rates despite government attempts to assist the poor. By contrast, employment did not suffer as devaluation and falling real wages helped local production to substitute for imports that had been previously paid for by oil income. Probit analysis of panel data shows that, all else equal, living in urban areas, in households with older and female heads, and lack of health insurance increase the chance of falling into poverty after the 2018 shock of the US maximum pressure campaign.

KEYWORDS:

• Iran sanctions
• household welfare
• employment
• poverty

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Shorter PPP series, notably from the World Bank, differ in levels but not trends.

2 See Tycoon's Death Penalty Points to Oil Corruption in Iran.

3 Salehi-Isfahani, Rising Employment Casts Doubt on IMF's Grim Forecast for Iran's Economy.

4 Homi Kharas, How a Growing Global Middle Class Could Save the World's Economy.

5 Iran's middle class has been eroding for some time. Now it's only getting worse.

6 Media reports of research done at Iran's Parliament Research Center put the share of informal employment at 60 percent.

Additional information

Funding

This work was supported by RethinkingIran project, SAIS, Johns Hopkins University (https://www.rethinkingiran.com).