2026 General Seminar - Anna Köhler (Bundeswehr München)

Title: Who bears the burden? The effects of sanctions on inequality

by Anna Köhler 

Abstract:  While the use of sanctions as diplomatic instruments has risen sharply, their humanitarian and distributive consequences remain poorly understood. Existing evidence suggests that sanctions often exacerbate poverty, child mortality, and other social hardships in targeted countries, yet rarely achieve meaningful policy change. This raises the question whether such effects may stem from sanctions disproportionately impacting population groups of low socio-economic stand, thereby increasing inequality.

To address this question, the study conducts a cross-country analysis of the relationship between sanctions and inequality. Using the Standardized World Income Inequality Database and applying entropy matching to construct comparable treatment and control groups, the analysis focuses on trade, financial, and aid sanctions imposed by the EU, US, and UN between 1973 and 2017.

The results indicate that sanctions are associated with a reduction in inequality, suggesting that the economic burden may be borne more heavily by higher-income groups during the first years following their implementation.

These findings challenge the common assumption that sanctions are badly targeted instruments and disproportionally hurt poor sub-populations. Causal mediation analysis further indicates, however, that these effects on inequality barely operate through the expected channels, such as reductions in trade openness or foreign direct investment, and only to a very limited extent through reductions in official development assistance. This highlights the necessity for future research on other mechanisms at place. Furthermore, the results indicate differences in both the magnitude and statistical significance of the effects across country income levels and sanction types.