An Economic Theory of Foreign Interventions and Regime Change
AbstractI construct a theory of foreign interventions in which the political preferences of the foreign country are determined by its different economic ties with alternative local groups.� Stronger economic ties make a group more influenceable from the outside, and thus more willing to grant economic and geopolitical concessions to the foreign country.� In the model, foreign interventions in favor of the most influenceable group are counterweighted by a natural tendency of the home country's political system to bring to power the least influenceable group.� While the foreign country can use its economic power to influence the geopolitical alignment of the home country, the outcome of this endeavor may be compromised by regime change.� In particular, when concessions to the foreign country cannot be renegotiated efficiently (possibly because of reputational concerns in the foreign country), regime change may lead to a loss of geopolitical alignment, even if all groups are ex-ante identical in terms of their geopolitical preferences.� These results may help interpret the pattern of Western interventions in the 20th century, as well as the role of economic nationalism in the political economy of regime change.� In particular, they may help understand the role of the Cold War in strengthening the West's preference for the status quo in many countries.� I provide historical evidence in favor of my arguments.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 549.
Date of creation: 01 Apr 2011
Date of revision:
Regime change; Foreign interventions; Economic power; Economic nationalism; Cold War; Latin America;
Other versions of this item:
- Roberto Bonfatti, 2011. "An Economic Theory of Foreign Interventions and Regime Change," CESifo Working Paper Series 3475, CESifo Group Munich.
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- F1 - International Economics - - Trade
- F5 - International Economics - - International Relations, National Security, and International Political Economy
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
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