Economic Sanctions and Informal Employment

Arbeitspapier

This paper examines how economic sanctions affect the allocation of workers across formal and informal employment. We analyse the case of the unprecedented sanctions imposed on Iran in 2012. Employing a difference-in-differences approach, we compare the probability of being employed in the informal sector before and after 2012 for workers in industries with different pre-existing exposure to international trade. Our analysis reveals that, following the sanctions, workers in industries with higher trade exposure are significantly more likely to experience informal employment compared to workers in industries with lower trade exposure. These results remain robust when accounting for potential sorting issues by using an instrumental variable approach. Our findings suggest that the sudden shock to market access caused by the sanctions might have induced a decline in firms' productivity, especially in industries that heavily depend on imported inputs, and therefore an increase in firms' incentives to reduce the costs by shifting their employees to the informal sector. This sheds light on an important margin of labour market adjustment through which sanctions can affect the economy of the target country.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 16589

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Informal Economy; Underground Economy ; Trade and Labor Market Interactions ; International Conflicts; Negotiations; Sanctions ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
• Thema: economic sanctions ; exposure to trade ; informal employment ; labor reallocation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kelishomi, Ali Moghaddasi ; Nistico, Roberto
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/282716
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ