Who Pays for Sanctions? The Regional Labor Market Effects of Sanctions in Iran

Abstract

On March 17, 2012, SWIFT disconnected sanctioned Iranian financial institutions from its global financial messaging network, constraining Iran’s ability to settle cross-border transactions. Using detailed Iranian trade data, we show that the disconnection was followed by a decline of roughly 50 percent in both imports and exports, affecting nearly all manufacturing sectors and reducing both trade volumes and the number of traded products. We then combine this trade shock with Iranian micro-data on workers to identify its local labor market consequences. Shahrestans (counties) specialized in export-oriented and import-reliant industries experienced substantial employment losses between 2011 and 2015, while regions specialized in import-competing industries recorded no offsetting employment gains. We find no evidence of significant relative wage adjustment across regions. Finally, we show that export-oriented shahrestans subsequently experienced significantly more protests during 2016-2018. Joint paper M. Bosker, M. Dehghani, and J. Emami Namini.