The Economic Cost of Revolution: The Iranian Case. A Synthetic Control Analysis

Serhat Hasancebi

Chapter 17 in Introduction to Islamic Economics and Finance, 2025, pp 415-435 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In 1978, a revolution in Iran succeeded in toppling Shah Mohammad Reza Pahlavi. After the Shah was forced to leave the country, Ayatollah Ruhollah Khomeini, one of the leaders of the revolution, returned from his exile in France to become the Supreme Leader of Iran. In this paper, we investigate the economic cost of the revolution using the synthetic control method. According to our estimates, we conclude that after the emergence of the revolution, the annual real gross domestic product (GDP) per capita in Iran declined by about 20.15% on average relative to its synthetic counterpart without the revolution in the period 1978–1980. If Iran had not faced such a revolution, the accumulated per capita GDP would have been $6,479 higher, which amounts to an average annual loss of about $2,159 over that period.

Keywords: Islamic Economics; Islamic Finance; Islamic Banking; Islamic Insurance; Sustainable Finance; Ethical Finance; Fintech and Islamic Finance; Islamic Finance Regulation; Islamic Banking Market (search for similar items in EconPapers)
Date: 2025
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