20.10.2020 New Study: The Economic Cost of the Islamic Revolution and War for Iran

What would Iran’s economy have looked like in the absence of revolution and war with Iraq? Prof. Farzanegan (@mr_farzanegan) answers this question by using synthetic control and estimating the economic cost of the Islamic revolution and subsequent war with Iraq.

Farzanegan in his new study shows that trajectories of the economies of factual Iran and its counterfactual were largely similar before the revolutionary protests of 1978 but diverged significantly afterward. The results show that, in total, an average Iranian has lost an accumulated sum of approx. $34,660 over 1978–1988.

 This loss is equivalent to 40% of real income per capita, which an Iranian could have earned in the absence of revolution and war. During 1978–1988, the average annual economic costs for an Iranian were US$ 3,150.

To check the reliability of the estimations, Farzanegan carried out a series of robustness analyses. He used the Possebom et al approach to gain more insights into the statistical significance of estimated income loss. The estimated confidence sets show that the income loss of Iran is not only sizable but also in most years statistically significant.

 The study is available at Defence and Peace Economics via: https://doi.org/10.1080/10242694.2020.1825314

 Some free e-prints are also available at: https://www.tandfonline.com/eprint/N3W8PCBFV58QPQB88MAS/full?target=10.1080/10242694.2020.1825314