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Theocracy and Resilience Against Economic Sanctions

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  • A. Naghavi
  • G. Pignataro

Abstract

This paper provides a simply theory to explain the impact of sanctions on a regime s policies and behavior. Sanctions are generally put to strip the target country from its available rents and weaken the government s stance against growing discontent in the population. We show however that sanctions may give legitimacy to an incumbent government by influencing the optimal level of religious ideology provided by the state and further stabilizing its grip to power and rents. While in a good state of nature sanctions build resilience as long as religious ideology among the population is strong, at bad times they compel the target country to move towards ideological moderation. In a world of asymmetric information, the target country always finds it optimal to send a signal that truly represents the prevailing state of nature in order to induce learning and reach a win-win outcome.

Suggested Citation

  • A. Naghavi & G. Pignataro, 2014. "Theocracy and Resilience Against Economic Sanctions," Working Papers wp977, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp977
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    References listed on IDEAS

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    Cited by:

    1. Farzanegan, Mohammad Reza & Raeisian Parvari, Mozhgan, 2014. "Iranian-Oil-Free Zone and international oil prices," Energy Economics, Elsevier, vol. 45(C), pages 364-372.
    2. 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.
    3. Jo Thori Lind & Daniel Chen, 2016. "The Political Economy Of Beliefs: Why Fiscal And Social Conservatives/Liberals Come Hand-In-Hand," 2016 Meeting Papers 606, Society for Economic Dynamics.
    4. Dario Laudati & M. Hashem Pesaran, 2023. "Identifying the effects of sanctions on the Iranian economy using newspaper coverage," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 271-294, April.
    5. Mohammad Reza Farzanegan & Mohammad Mohammadikhabbazan & Hossein Sadeghi, 2015. "Effect of Oil Sanctions on the Macroeconomic and Household Welfare in Iran: New Evidence from a CGE Model," MAGKS Papers on Economics 201507, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Nguyen, Trung Thanh & Do, Manh Hung, 2021. "Impact of economic sanctions and counter-sanctions on the Russian Federation’s trade," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 267-278.
    7. 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.
    8. Coşgel, Metin M. & Hwang, Jungbin & Miceli, Thomas J. & Yıldırım, Sadullah, 2019. "Religiosity: Identifying the effect of pluralism," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 219-235.
    9. Roel Dom & Lionel Roger, 2018. "Economic sanctions and domestic debt: Burundi's fiscal response to the suspension of budget support," Discussion Papers 2018-12, University of Nottingham, CREDIT.
    10. Tran Manh Ha & Doan Ngoc Thang, 2023. "Economic sanction and global sourcing complexity: A cross‐country analysis," The World Economy, Wiley Blackwell, vol. 46(4), pages 1017-1050, April.

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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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