The Effects of the Covid-19 Pandemic, Economic Sanctions, and Institutional Quality on the Poverty Gap: The Case of Iran

The literature lacks research on how the COVID-19 crisis and the interaction between sanctions and institutions affect the poverty gap. Hence, our goal is threefold. Firstly, we calculate the poverty gap. Secondly, we examine the impacts of economic sanctions, the COVID-19 pandemic, and institutional quality on the poverty depth. Thirdly, we investigate the interaction between institutions and sanctions. Iran is chosen for this case study because it has experienced the most severe sanctions ever imposed on a nation. Our estimation results show that good institutions decrease, but sanctions and income inequality increase the poverty gap. However, better institutions partially offset the adverse effect of sanctions on the poverty depth. Moreover, the COVID-19 crisis pushes more people into extreme poverty in the urban area than in the rural area. Finally, financial development is anti-poor in Iran. Our findings might have important implications for policymakers and social planners working to eradicate poverty.