This paper investigates the effect of economic sanctions on employment. We exploit the imposition of a series of unexpected and unprecedented international
economic sanctions on Iran in 2012 and estimate the short-run effects of the
change in import exposure on manufacturing employment at the industry level.
Our estimates indicate that the sanctions led to an overall decline in manufacturing employment growth rate by 16.4 percentage points. However, we uncover significant asymmetric effects across industries with different ex-ante import shares.
Interestingly, the effects are mostly driven by labor-intensive industries and industries that heavily depend on imported inputs. This suggests that the overall
negative impact of the sanctions on employment might have been largely due to
the decline in productivity experienced by industries with a high propensity to
import inputs from abroad.
This paper was accepted for publication in the journal World Development and the definitive published version is available at https://doi.org/10.1016/j.worlddev.2021.105760.