Efficacy of Economic Sanctions on Imposing Costs to State-Owned Enterprises: The Case of Iran

Abstract The effectiveness of economic sanctions is a controversial issue, with their ability to achieve intended goals under scrutiny. This paper offers a distinctive angle by examining how sanctions impact state-owned enterprises (SOEs) within the countries they target. In particular, it focuses on the effects of sanctions on Iranian state-owned enterprises to assess the public sector’s burden. Through difference-in-difference analysis and detailed survey data from the manufacturing industry, the findings indicate that sanctions have a more detrimental effect on the revenue, profitability, and efficiency of SOEs compared to private companies in the same sectors. Unlike private companies, SOEs experienced an increase in wages and employment following the imposition of sanctions, implying their use as a buffer to shield workers during economic hardship. From a distributional standpoint, sanctions disproportionately affected men in the private sector, who then saw the most significant wage benefits in SOEs. However, women in SOEs did not enjoy similar advantages, which suggests that sanctions may have worsened gender disparities in the workforce.