23.10.2025 New VoxDev Publication: How Sanctions Eroded Iran’s Middle Class

A new article by Professor Mohammad Reza Farzanegan and Professor Nader Habibi, published on VoxDev (17 October 2025), examines the social and economic consequences of international sanctions on the middle class in Iran, offering new empirical evidence and policy insights.

Using the Synthetic Control Method, the study constructs a “synthetic” Iran — a weighted combination of countries not exposed to the severe sanctions imposed after 2012. The results show a sharp and persistent decline in the size and economic stability of Iran’s middle class following the intensification of sanctions.

Key findings:

• The share of the middle class dropped by about 17 percentage points per year between 2012 and 2019, compared to the counterfactual scenario.
• Sanctions reduced per capita income, disrupted trade and investment, and worsened employment conditions, pushing many into informal or vulnerable jobs.
• Domestic policy responses amplified these effects through rent-seeking, misallocation of resources, and a growing state role in the economy.

The study highlights that weakening the middle class undermines social stability, political moderation, and long-term growth. It calls for sanction design that better considers the unintended costs borne by ordinary citizens.

Read the full article on VoxDev: How sanctions eroded Iran’s middle class