Volume 20, Issue 76 (4-2020)                   refahj 2020, 20(76): 9-37 | Back to browse issues page

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heidary K, bahrami F. The Impact of Sanctions on the Welfare Indicators of Urban and Rural Households of Iran. refahj. 2020; 20 (76) :9-37
URL: http://refahj.uswr.ac.ir/article-1-3559-en.html
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Extended Abstract
Introduction: Economists interested in welfare issues are trying to estimate the effects of different policies implemented by governments on welfare with different indices. In addition, they are trying to analyze the effects of shocks and disruptions in economies to identify ways out of these crises because from the perspective of the welfare economy, the impact of shocks on household welfare such as food security, poverty and inequality is detrimental. However, in macroeconomics, the outcome of policies adopted by governments is estimated at per capita income. However, knowing the level of per capita income in the country is not enough to understand what the welfare of any society is like. Therefore, in so doing, welfare economists rather consider indicators such as the size of poverty and inequality or the perceived food value of a household. The major focus of the study is on examining the trend and the extent of the aforementioned indicators during the period when external shocks hit the economy, addressing the tough issues of whether sanctions have adverse effects on the well-being of Iranian households, especially in the context of the expansion and deepening of poverty
Method: In order to examine the mechanism of the impact of sanctions on the percentage of poverty, inequality, as well as the amount of energy received or the number of calories consumed by individuals, the theoretical relationship between the sanctions and the above-mentioned indicators must be determined first. Then a practical evaluation of this relationship will be possible. Since the effects of the sanctions and shocks resulting from inappropriate policy making on economic variables and the welfare of households are similar, it is virtually impossible to disentangle the effects of sanctions and policy shocks on the economy. This becomes more complex when policy shocks occur as sanctions expand (Nafio, 1979, p.10). But what the concept of well-being means when such mistakes occur. The well-being and satisfaction of preferences have already been identified (Mousavi Samarin, 2014, p.12). How well individuals or households are satisfied or to what extent their preferences are taken into account is a complex issue in the welfare economy. However, in order to assess the impact of sanctions on household welfare some criteria need to be defined taking account of theoretical concepts in the welfare economy.
To this end, the indicators of the effects of sanctions on welfare were evaluated by examining the temporal trends. These indicators in the area of food security will be the calorie intake of households, and in the context of poverty and inequality the indicators are the Gini coefficient and percentage of poor households. Therefore, the following theoretical bases for measuring the mentioned welfare indicators are presented.
Findings: The results show that tightening US sanctions since the early 1980s has led to a decline in the number of calories consumed by urban and rural households. From 1997 until 2002 the number decreased by 10 to 30 percent among urban households and by 10 to 20 percent among rural households, which is less than the standard level of calorie intake.
Table. Calorie Intake among Urban and Rural households by Decimal from 2002 to 2018: Calories per Day
Area    Mean    D1    D2    D3    D4    D5    D6    D7    D8    D9    D10
Urban    2513    1894    2071    2200    2316    2391    2478    2614    2770    2940    3460
Rural    2755    1726    2146    2307    2464    2608    2750    2801    3076    3400    4273

Even the adoption of the brokerage did not affect the downward trend. The results on the percentage of the poor also indicate that although this trend has been constant during the period of 2002-2009 despite the sanctions, but with the intensification of sanctions since 2010, the poverty rate has been increasing. While messages from Bridgeport appear to have sought to slow down the growth of the index, sanctions have been on the rise as sanctions intensify. Regarding the income inequality index, the model obtained from the results of the study showed that income inequality declined from 2002 to 2010, the index declined even sharply in 2011. The implementation of the first phase of targeted subsidies in December 2010 and the allocation of 455,000 Rials per person as cash subsidies and on the other hand, tight controls on price increases caused inequality to continue to decline in 2011 and 2013, but after 2013 and the exchange rate increased up to about 3 to 4 times, the trend has been reversed, and the inequality index has also increased. Although the ratification and initiation of economic activity has slightly reduced the index, inequality has continued to increase with the re-imposition of sanctions in 2018.
Discussion: Although the results of various studies on the effects of sanctions on the behavior of the target country are not consistent, the sanctions have definitely had negative effects on the target country’s economy. This article seeks to examine the impact of US sanctions on household welfare, in particular the number of calories consumed, the percentage of the poor, and the income inequality of Iranian households. What is evident is a decrease in oil revenues and a disruption in the country’s foreign exchange system, production costs, and consequently consumer prices, and naturally, rising food prices, in addition to affecting quality, it also limits the number of calories consumed by Iranian households.
While the negative effects of the boycott on the financial markets and consequently the commodity market are inevitable, supportive measures as well as an approach that can reduce the costs of the boycott are likely to be feasible. Currently, policies and laws in Iran that make the business environment of the country uncompetitive and insecure for the domestic investor, such as sanctions, have negative effects on welfare indicators, and therefore deregulation and convergence between policies and laws are among the strategies that improve domestic productivity and can offset some of the rising costs of international sanctions. Regarding market adjustment policies and, of course, sanctions situation, for achieving economic and welfare goals, the target population needs to be defined for supportive receipts, deregulation of the business market, and convergence between policies and laws are the most important ways to reduce the negative impact of sanctions on Iranian household welfare indicators.
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Received: 2020/01/19 | Accepted: 2020/06/23 | Published: 2020/10/6

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