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The Opportunity Cost of the Islamic Revolution and War for Iran


  • Mohammad Reza Farzanegan

    () (Philipps-Universitaet Marburg)


We estimate the opportunity cost for Iran due to the Islamic revolution and eight years’ war with Iraq (1978/79-1988). We apply the synthetic control method in order to compare Iran with a synthetic Iran and answer this counterfactual question. Our results show that, in total, an average Iranian has lost $34,660 (in constant 2010 US$) from 1978 to 1988. This loss is equivalent to 40% of income per capita, which an Iranian could reach at the absence of revolution and war.

Suggested Citation

  • Mohammad Reza Farzanegan, 2019. "The Opportunity Cost of the Islamic Revolution and War for Iran," MAGKS Papers on Economics 201929, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:201929

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    References listed on IDEAS

    1. Stefano Costalli & Luigi Moretti & Costantino Pischedda, 2017. "The economic costs of civil war," Journal of Peace Research, Peace Research Institute Oslo, vol. 54(1), pages 80-98, January.
    2. Fırat Bilgel & Burhan Can Karahasan, 2017. "The Economic Costs of Separatist Terrorism in Turkey," Journal of Conflict Resolution, Peace Science Society (International), vol. 61(2), pages 457-479, February.
    3. repec:oup:wbecrv:v:33:y:2019:i:1:p:231-258. is not listed on IDEAS
    4. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    5. Samer Matta & Simon Appleton & Michael Bleaney, 2019. "The Impact of the Arab Spring on the Tunisian Economy," World Bank Economic Review, World Bank Group, vol. 33(1), pages 231-258.
    6. Horiuchi, Yusaku & Mayerson, Asher, 2015. "The Opportunity Cost of Conflict: Statistically Comparing Israel and Synthetic Israel," Political Science Research and Methods, Cambridge University Press, vol. 3(3), pages 609-618, September.
    7. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    8. Kaul, Ashok & Klößner, Stefan & Pfeifer, Gregor & Schieler, Manuel, 2015. "Synthetic Control Methods: Never Use All Pre-Intervention Outcomes Together With Covariates," MPRA Paper 83790, University Library of Munich, Germany.
    9. Gharehgozli, Orkideh, 2017. "An estimation of the economic cost of recent sanctions on Iran using the synthetic control method," Economics Letters, Elsevier, vol. 157(C), pages 141-144.
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    More about this item


    synthetic control method; treatment effect; Iran; war; revolution;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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