WHO BEARS THE COST OF ECONOMIC SANCTIONS? EVIDENCE ON POVERTY IN TARGETED COUNTRIES

Abstract

Economic sanctions are commonly used as tool of foreign policy to exert pressure on targeted governments and amend their political behaviour. However, concerns persist regarding their unintended socioeconomic consequences, particularly for vulnerable populations. This study examines the nexus between U.S. economic sanctions and poverty in targeted states, while exploring whether this association varies according to countries' natural resource endowment and bilateral trade dependence on the United States. Using an unbalanced panel of 51 targeted states over the period 1975–2012, the study employs fixed-effects model to evaluate the impact of economic sanctions on both the incidence and depth of poverty. Our findings are threefold: first, economic sanctions affect poor class by greater extent as compared to that of rich, resulting in a greater rise of poverty in the sanctioned states. Second, sanctioned states’ natural resource endowment plays a moderating role that allays the impact of economic sanctions on the depth and incidence of poverty in the sanctioned states. Third, in contrast, stronger bilateral trade linkages with the US intensify the adverse effects of sanctions, reflecting greater economic vulnerability to interruptions in established trade affairs. These findings suggest that the consequences of US economic sanctions outspread beyond their intended political targets and may disproportionately affect economically vulnerable populations. The study underscores the importance of considering country-specific economic structures when designing sanctions and calls for greater attention to their potential poverty consequences.