The Impact of US and UN Economic Sanctions on Income Inequality of the Target State: Evidence from a Bayesian Approach

Abstract

This study examines the impact of US and UN economic sanctions on income inequality in African- and Asian-targeted states from 1980–2019, using the Bayesian Generalized Method of Moment’s (BGMM) technique. One essential weapon of international politics for promoting peaceful international cohabitation is the imposition of political and economic sanctions, despite ongoing debates on the effectiveness of punishments in generating disutility. The BGMM was chosen due to its ability to address the dynamics of several entities in the data. The study reveals a positive relationship between economic sanctions and income inequality, except for pre-tax income held by the top 10%, indicating a significant contribution to income inequality. The study further finds that African countries seem to suffer the most from the execution of these sanctions compared to Asian countries. From a policy perspective, the study suggests implementing targeted assistance programs such as financial support and job training programs for vulnerable groups, such as low-income workers and small businesses, affected by sanctions. Additionally, policymakers should prioritize investments in less-impacted sectors, creating alternative job opportunities, and reducing income disparities. This approach can mitigate the negative effects of economic sanctions on income inequality by addressing specific needs and diversifying the economy.