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Coercive Trade Policy

Author

Listed:
  • Vincent Anesi
  • Giovanni Facchini

Abstract

Coercion is used by one government (the "sender") to influence the trade practices of another (the "target"). We build a two-country trade model in which coercion can be exercised unilaterally or channeled through a "weak" international organization without enforcement powers. We show that unilateral coercion may be ineffective because signaling incentives lead the sender to demand a concession so substantial to make it unacceptable to the target. If the sender can instead commit to the international organization's dispute settlement mechanism, then compliance is more likely because the latter places a cap on the sender's incentives to signal its resolve.

Suggested Citation

  • Vincent Anesi & Giovanni Facchini, 2019. "Coercive Trade Policy," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 225-256, August.
    • Handle: RePEc:aea:aejmic:v:11:y:2019:i:3:p:225-56
    Note: DOI: 10.1257/mic.20170085
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    Cited by:

    1. Vincenzo Bove & Jessica Di Salvatore & Roberto Nisticò, 2023. "Economic Sanctions and Trade Flows in the Neighborhood," Journal of Law and Economics, University of Chicago Press, vol. 66(4), pages 671-697.

    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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