This research paper applies the synthetic control method to measure the economic cost of sanctions imposed on South Africa between 1985 and 1994. The economic sanctions imposed on South Africa between 1985 and 1994 by the United Nations, the United States of America, and the European Community negatively affected the economy. This negative effect on the economy, measured by the gross domestic product per capita, continued until 1998 despite the sanctions having ended four years earlier. Using the synthetic control method, this research paper measures the economic cost by estimating the difference in the gross domestic product per capita between the treated country (South Africa) and the counterfactual (synthetic South Africa). Synthetic South Africa represents South Africa without undergoing treatment (sanctions). What would have happened if sanctions were not imposed? The results indicate that the economic cost is most pronounced after the sanctions ended, indicating a substantial lag effect. South Africa’s gross domestic product per capita is 30% lower than synthetic South Africa by 1998. This potentially indicates that the sanctions had a long-lasting effect. The results are not sensitive to the composition of the donor pool. Furthermore, the placebo tests reveal that the results are statistically significant at the 10% threshold with only one country (Philippines) having a treatment effect that is larger than South Africa’s and a better fit. For target nations, it means that policy makers should acknowledge that a policy that leads to sanctions may have a severe and long-lasting impact on the economy. Potential areas for future investigation include estimating the humanitarian effect of the sanctions imposed on South Africa and applying the synthetic control method approach to other sanctions episodes in the past.

show more