Economic sanctions and informal employment

Ali Moghaddasi Kelishomi and Roberto Nisticò ()

Labour Economics, 2024, vol. 89, issue C

Abstract: 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 and focus on the manufacturing sector. 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 shed light on an important margin of labour market adjustment through which sanctions can affect the economy of the target country.

Keywords: Economic sanctions; Exposure to trade; Informal employment; Labor reallocation (search for similar items in EconPapers)
JEL-codes: E26 F16 F51 O17 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Economic Sanctions and Informal Employment (2023)
Working Paper: Economic Sanctions and Informal Employment (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:89:y:2024:i:c:s0927537124000769

DOI: 10.1016/j.labeco.2024.102581

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