Economic Sanctions and Labour Market Impacts

Economic sanctions are a powerful tool that can be used to punish states for violations of international norms such as human rights abuses, nuclear proliferation, territorial aggression, and cyber activity that threatens democratic elections. They can also act as a deterrent, letting other countries know that they will be punished for violating norms the sanctioning country cares about.

Sanctions have a long history. Blockades, restricting ports, and cutting off trade have been employed since ancient times, with the aim of starving a nation into submission without having to engage in military force. In modern times, financial sanctions are particularly effective. They can prevent a nation from accessing international markets, stop foreign investment, and limit the flow of capital that could otherwise finance domestic conflict or instability.

A recent review found that about a third of the sanctions that have been imposed over the past decade can be classified as having made at least a modest contribution towards a stated goal, although it is difficult to estimate success rates precisely because they are often aimed at fostering or exacerbateing political and economic instability rather than just stopping a particular action. In addition, the effectiveness of sanctions depends on a delicate dance between imposing pressure and not plunging the targeted nation into a humanitarian crisis.

In terms of labour market outcomes, the majority of studies (n=24; 55% of all outcome measures) reported positive impacts on employment outcomes for sanctioned individuals in the short term. However, in the longer run, this effect was offset by adverse effects on job quality and stability as well as negative or null effects on earnings and income.