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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 the preferences of the foreign country over alternative local groups are determined by each group's international economic ties. In equilibrium, the foreign country supports the group with which it has the strongest ties, since this is most influenceable from the outside. However this is counterweighted by the tendency of the domestic political system to favour the least influenceable group. I allow for a non-economic dimension of policy (geopolitics), and study how the saliency of this dimension may play in favor of the incumbent group. My results help interpret the economic rationale for many Western interventions in developing countries in the 20th century, and the role of economic nationalism in motivating the struggle for regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for specific local groups. I provide detailed historical evidence in favor of my arguments.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3475.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3475

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Related research

Keywords: regime change; foreign interventions; economic power; economic nationalism; Cold War; Latin America;

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References

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  1. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  2. Arindrajit Dube & Ethan Kaplan & Suresh Naidu, 2011. "Coups, Corporations, and Classified Information," NBER Working Papers 16952, National Bureau of Economic Research, Inc.
  3. Alessandro Lizzeri & Nicola Persico, 2004. "Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, With an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 705-763, May.
  4. Berger, Daniel & Easterly, William & Nunn, Nathan & Satyanath, Shanker, 2013. "Commercial Imperialism? Political Influence and Trade during the Cold War," Scholarly Articles 11986334, Harvard University Department of Economics.
  5. Davide Ticchi & Andrea Vindigni, 2007. "War and Endogenous Democracy," Working Papers, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini 0715, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2007.
  6. William Easterly & Shanker Satyanath & Daniel Berger, 2008. "Superpower Interventions and their Consequences for Democracy: An Empirical Inquiry," NBER Working Papers 13992, National Bureau of Economic Research, Inc.
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Cited by:
  1. Toke S. Aidt & Facundo Albornoz & Martin Gassebner, 2012. "The Golden Hello and Political Transitions," CESifo Working Paper Series 3957, CESifo Group Munich.
  2. Toke Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1402, Faculty of Economics, University of Cambridge.

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