Employment effects of economic sanctions in Iran.

• We study the impact of economic sanctions on employment in Iran. • We estimate the short-run effects of changes in import exposure on manufacturing employment at the industry level. • The sanctions caused an overall contraction in Iran's manufacturing employment growth rate by 16.4 percentage points. • We document significant reallocation effects in employment across industries with different degree of openness to trade. • The effects are driven by labor-intensive industries and industries that heavily rely on imported inputs. This paper investigates the effect of economic sanctions on employment. We exploit the imposition of a series of unexpected and unprecedented international economic sanctions on Iran in 2012 and estimate the short-run effects of the change in import exposure on manufacturing employment at the industry level. Our estimates indicate that the sanctions led to an overall decline in the manufacturing employment growth rate by 16.4 percentage points. However, we uncover significant asymmetric effects across industries with different ex-ante import shares. Interestingly, the effects are mostly driven by labor-intensive industries and industries that heavily depend on imported inputs. This suggests that the overall negative impact of the sanctions on employment might be largely due to the decline in productivity experienced by industries with a high propensity to import inputs from abroad. [ABSTRACT FROM AUTHOR]