An Economic Theory of Foreign Interventions and Regime Change
AbstractI 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 InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3475.
Date of creation: 2011
Date of revision:
regime change; foreign interventions; economic power; economic nationalism; Cold War; Latin America;
Find related papers by JEL classification:
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- F10 - International Economics - - Trade - - - General
- F50 - International Economics - - International Relations and International Political Economy - - - General
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
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