(COICOP).<sup>25</sup> Moreover, these data contain rich information at the individual level including age, gender, years of education, income, marital status, and relation with the head of family.<sup>26</sup> The Iranian data are ideal for studying the effects of family income shock on children for two reasons. First, I can link children to their parents and observe their family characteristics (such as family income, parents’ education, family size, and family expenditure). Second, the HIES contain children’s years of schooling, enrollment at different levels of education, and family education spending. Information on the education spending includes payments for books, tuition, private tutoring, and donation to the school for different levels of education (pre-primary, primary, secondary, post-secondary non-tertiary, tertiary, and education not definable by level).

I restrict my main sample to the households with children aged 6-24 because children start school at age 6 and most individuals complete their education by age 24 in Iran.<sup>27</sup> Children aged six who were born at the start of the academic year (September 23th) or later are excluded because they are not eligible to enroll in school. I choose my sample period to include all observations from years 1995 to 2013 (1374 to 1392 in Persian Calendar), 12 years before and 7 years after the implementation of the sanctions. I exclude the years 2014 and 2015 when Iran and P5+1 were negotiating over the nuclear program, and people would expect the sanctions to be terminated. I re-conduct the analysis including 2014 and 2015 as a robustness check in section 6. I consider only those children who live with their parents as the data do not report parental characteristics for those who do not live with their parents. 87% of individuals age 18-24 live with their parents.<sup>28</sup> The sanctions could have had an impact on the composition of households. In particular, if older children are more likely to be in the household or more likely to married young as a result of the sanctions, this would bias the estimates. In section 4, I conduct an analysis of cohort size and find that the sanctions did not affect household composition. In particular, the sanctions had no effect on the probability with which young adults (18-24) live with their parents.

Although only 6% of children age 6-24 in treated and control households live in rural areas,<sup>29</sup> for the main analysis, I exclude them from the sample. I study households who live in urban regions of the country because there are differences between rural and urban areas in factors affecting education spending. Estimated elasticities suggest that rural households’ spending on education is more sensitive to changes in income relative to urban households’ (see, for example, Mussa (2013)). Moreover, education opportunities are different between cities and rural communities, in particular, all rural schools are public. Also, private supplementary tutoring is not available to students in rural areas. One important concern is that endogenous migration could bias the results, although the intensity of the sanctions does not vary across regions. In particular, if families of highly educated children move to rural areas, the effect of sanctions will be overestimated by considering only children in urban areas. To explore this possibility, I first looked at the migration patterns before and after the sanction. 94% of children age 6-24 in treated and control households live in urban areas (77% of them did not change their location at all; 17% moved from a city to another city); 1% moved from a village to another village; and only 5% moved between urban

> 25Since 2010, HIES is collected as a rotating panel based on a 3-in-then-out method, however, the rotating nature of the panel can not be used in this study because households’ id is changed for confidentiality purpose in the version available to researchers. About 90% of children in the main sample of this paper are distinct observations.

> 26HIES report detail information on labor income including permanent, non-permanent, and non-labor incomes for each member of the family.

> 27Less than 5% of students are aged above 25.

> 28Almost all young adults who do not live with their parents are married.

> 29Most workers in rural areas work in agriculture and construction industries

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