The Effect of Economic Sanctions on Income Inequality in Iran: A Synthetic Control Approach

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Mousavi, Mohammad Ehsan | 2024

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 57841 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Keshavarz Haddad, Gholamreza
Abstract:
A large portion of the existing literature on the distributional effects of economic sanctions highlights their tendency to increase income inequality in the targeted countries. This study examines the impact of sanctions imposed on Iran in 2012 on income inequality in its subsequent years. To investigate this, it is necessary to estimate the counterfactual trajectory of income inequality in Iran in the absence of sanctions and compare it to the actual trend in the years following the sanctions. Using the Standardized World Income Inequality Database (SWIID) and employing the Synthetic Control Method (SCM), this study estimates a counterfactual trajectory for income inequality in Iran during the post-sanctions period. The counterfactual is constructed to be similar to pre-sanctions Iran in terms of income inequality and its covariates as well as a set of governance indices. The results, using the Gini coefficient as the outcome variable, indicate that the sanctions imposed in 2012 led to an increase in income inequality in Iran. The application of placebo studies and several sensitivity analyses confirms the significance and robustness of these findings
Keywords:
Economic Sanctions ; Income Inequality ; Synthetic Control Method ; Governance