The impact of trade sanctions on the relative demand for skilled labor and wages: Evidence from Iran

Javad Nosratabadi

The Journal of International Trade & Economic Development, 2023, vol. 32, issue 2, 219-239

Abstract: This paper examines the effects of trade sanctions on the relative demand for skilled labor and wages by using Iranian industrial manufacturing data covering 7 years before and 7 years after the sanction year. The decomposition of the change in the aggregate demand for skilled labor sheds light on the fact that it comes from labor reallocation within industries, not from across industries. The trade sanctions adversely affected both exporters' and non-exporters' total factor productivity; however, non-exporters endured a larger negative impact. As a result of the significant reduction in industries' total factor productivity, the relative demand for skilled labor decreases which results in a decrease in the real wage per-worker as well. Furthermore, exporters, compared to non-exporters, are responsible for more changes in the relative demand for skilled labor, are faster in changing skills, and their change in skills have a greater impact on the real wage per-worker.

Date: 2023
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DOI: 10.1080/09638199.2022.2083216

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