Economic sanctions and income inequality: impacts of trade restrictions and foreign aid suspension on target countries

Abstract

This research examines the relationship between economic sanctions and income inequality of sanctioned states. Economic sanctions have a discernible effect on target income inequality. I argue that such an effect significantly varies across sanctions instruments and economic conditions of sanctioned countries. Data analysis for 152 countries from 1974 to 2011 shows that import sanctions increase inequality of labor-abundant targets, but such an effect disappears in labor-scarce targets, whereas the findings provide no reliable evidence for the effect of export sanctions. The results also suggest that foreign aid sanctions reduce the inequality of targets that are significantly dependent on foreign assistance.

Keywords

Economic sanctions foreign aid suspension income inequality trade restrictions

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