Figure 1: Average Real Income, Total Expenditures, and Education Spendings for Iranian Households <!-- Start of picture text --> 160 6<br>Sanctions Iran<br>140 Deal<br>negotiatian 5<br>120<br>4<br>100<br>80 3<br>60<br>2<br>40<br>1<br>20<br>Rafsanjani Khatami Ahmadi Nejad Rouhani<br>0 0<br>Real Income Real Expenditure Real Education Expenditure<br>Millions Rials (2011 Prices) Million Rials (2011 Prices)<br>Real Income & Expenditure Real Education Expenditure<br>1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016<br><!-- End of picture text --> _Source: Author’s calculations from HEIS data._ Note: Figure displays the decreases in average real annual income, total expenditures, and education spendings for Iranian households over the years of economic sanctions.

The analysis of this paper reveals two main findings. First, among children who ever been between the ages 6 to 24 during years 2006-2013, sanctions decreased the years of schooling significantly by 0.1 years (0.3 years among children ages 15-24 years) and the probability of attending college (any post-secondary programs) by 4.8 percentage points. This effect on children’s education is more than two times larger than previous estimates of the effect of family income on attending college (e.g., Acemoglu and Pischke (2001); Blanden and Gregg (2004); Hilger (2016)) likely because of the persistent shock and lack of adjustment possibilities.<sup>7</sup> Also, these negative effects are larger for children who were exposed longer to the sanctions and children at crucial ages (high school dropout age and matriculation at a university). In particular, the years of schooling and probability of attending college significantly decreased by 0.4 years and 6.1 percentage points, respectively among cohorts whose more years of schooling career overlapped with the sanctions. Moreover, the economic sanctions decreased the enrollment rate at the high school by 4.3 percentage points among children at high school dropout age (16 years old) with a larger effect among girls and decreased the probability of attending college at age 18 (the average age of matriculation) by 15.4 percentage points. These effects worsen when children reach the age of 16 and 18 at a later stage of the sanctions period. A simple back of the envelope calculation shows that if these children were able to enroll in college at the same rate as college enrollment in the year 2006 and have the wage rates of the year 2006, their lifetime earnings would increase by 41%. Also, 45% of the costs to the society associated with the reduction in earnings comes from decreased earnings for the current workers, and 55% comes from decreased earnings for the next generation. It suggests that the cost estimates using only earnings of the current generation may only capture less than half of the overall cost.

Second, this paper examines the effects of the sanctions on investment in children’s education by looking at household spending on education. This paper results show that after the implementation of the sanctions,

> 7Acemoglu and Pischke (2001) find a 10% decrease in family income is predicted to decrease college enrollment by 1-1.4 percentage point. Other studies find even smaller effects, for example, Hilger (2016) finds a father’s layoff reduces children’s college enrollment by less than half of one percentage point, despite dramatically reducing current and future parental income (by 14% initially and 9% after 5 years). He explains that much of reduction in parental spending on education may be offset by greater financial aid.

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