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An economic theory of foreign interventions and regime change

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  • Roberto Bonfatti

Abstract

I construct a theory of foreign interventions in which a home country's main trade partner may influence the course of regime change. The foreign country intervenes in support of the group that draws the largest gains from trade, since such a group is willing to concede most in trade agreements. But interventions are more than offset by the domestic political system, which supports in power the group that concedes least (economic nationalism). I allow for geopolitical competition between the main trade partner and a second foreign country as well as for domestic ideological preferences over the two and look at how geopolitical competition interacts with the economic mechanism described above. My results help interpret some of the patterns of Western interventions in the 20th century and the role of economic nationalism in regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for incumbent elites, even when the oppositions did not have a strong communist ideology. I provide detailed historical evidence in favour of my arguments.

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  • Roberto Bonfatti, 2017. "An economic theory of foreign interventions and regime change," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 306-339, February.
  • Handle: RePEc:cje:issued:v:50:y:2017:i:1:p:306-339
    DOI: 10.1111/caje.12258
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    Cited by:

    1. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2019. "Foreign in influence and domestic policy: A survey," Cambridge Working Papers in Economics 1928, Faculty of Economics, University of Cambridge.
    2. Roberto Bonfatti, 2017. "An economic theory of foreign interventions and regime change," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 306-339, February.
    3. Eguia, Jon X., 2022. "Multilateral regime change," Journal of Public Economics, Elsevier, vol. 205(C).
    4. Aidt, Toke S. & Albornoz, Facundo & Gassebner, Martin, 2018. "The golden hello and political transitions," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 157-173.
    5. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2021. "Foreign Influence and Domestic Policy," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 426-487, June.
    6. Toke S. Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross-National Externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 272-297, February.
    7. Abu-Bader, Suleiman & Ianchovichina, Elena, 2019. "Polarization, foreign military intervention, and civil conflict," Journal of Development Economics, Elsevier, vol. 141(C).
    8. Garcia-Alonso, Maria D.C. & Levine, Paul & Smith, Ron, 2016. "Military aid, direct intervention and counterterrorism," European Journal of Political Economy, Elsevier, vol. 44(C), pages 112-135.

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    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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