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Foreign Influence and Domestic Policy

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  • Toke S. Aidt
  • Facundo Albornoz
  • Esther Hauk

Abstract

In an interconnected world, economic and political interests inevitably reach beyond national borders. Since policy choices generate external economic and political costs, foreign state and non-state actors have an interest in influencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes three principal forms: (i) voluntary agreements, (ii) policy interventions based on rewarding or sanctioning the target country to obtain a specific change in policy, and (iii) institution interventions aimed at influencing the political institutions in the target country. We propose a unifying theoretical framework to study when foreign influence is chosen and in which form, and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines.

Suggested Citation

  • 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.
  • Handle: RePEc:aea:jeclit:v:59:y:2021:i:2:p:426-87
    DOI: 10.1257/jel.20201481
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    Cited by:

    1. Endrich, Marek & Gutmann, Jerg, 2020. "Pacem in Terris: Are Papal Visits Good News for Human Rights?," ILE Working Paper Series 37, University of Hamburg, Institute of Law and Economics.
    2. Absher, Samuel & Grier, Robin & Grier, Kevin, 2023. "The consequences of CIA-sponsored regime change in Latin America," European Journal of Political Economy, Elsevier, vol. 80(C).
    3. Koppenberg, Maximilian & Mishra, Ashok K. & Hirsch, Stefan, 2023. "Food aid and violent conflict: A review and Empiricist’s companion," Food Policy, Elsevier, vol. 121(C).
    4. Bandyopadhyay, Subhayu & Sandler, Todd, 2023. "Politically influenced counterterrorism policy and welfare efficiency," European Journal of Political Economy, Elsevier, vol. 76(C).
    5. Dorine Boumans & Klaus Gründler & Niklas Potrafke & Fabian Ruthardt, 2022. "Political Leaders and Macroeconomic Expectations: Evidence from a Global Survey Experiment," CESifo Working Paper Series 9974, CESifo.
    6. Aldunate, Felipe & Gonzalez, Felipe & Prem, Mounu, 2021. "Make the Economy Scream? U.S. Banks and Foreign Firms During the Cold War," SocArXiv bhwk7, Center for Open Science.
    7. Juan Moreno-Cruz & Anthony Harding, 2022. "A Unifying Theory of Foreign Intervention in Domestic Climate Policy," CESifo Working Paper Series 10172, CESifo.
    8. Yilidirim, Aydin & Basedow, Robert & Fiorini, Matteo, 2020. "EU Trade and Non-Trade Objectives: New Survey Evidence on Policy Design and Effectiveness," CEPR Discussion Papers 14835, C.E.P.R. Discussion Papers.
    9. Eguia, Jon X., 2022. "Multilateral regime change," Journal of Public Economics, Elsevier, vol. 205(C).
    10. Libman, Alexander & Stone, Randall W. & Vinokurov, Evgeny, 2022. "Russian power and the state-owned enterprise," European Journal of Political Economy, Elsevier, vol. 73(C).
    11. Moreno-Cruz, Juan & Harding, Anthony, 2023. "A Unifying Theory of Foreign Intervention in Domestic Climate Policy," RFF Working Paper Series 23-24, Resources for the Future.
    12. Gutmann, Jerg & Neuenkirch, Matthias & Neumeier, Florian, 2023. "The economic effects of international sanctions: An event study," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1214-1231.
    13. Aldunate, Felipe & González, Felipe & Prem, Mounu, 2024. "The limits of hegemony: U.S. banks and Chilean firms in the Cold War," Journal of Development Economics, Elsevier, vol. 166(C).
    14. Vu M. Ngo & Toan L. D. Huynh & Phuc V. Nguyen & Huan H. Nguyen, 2022. "Public sentiment towards economic sanctions in the Russia–Ukraine war," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(5), pages 564-573, November.
    15. Lena Dräger & Klaus Gründler & Niklas Potrafke, 2022. "Political Shocks and Inflation Expectations: Evidence from the 2022 Russian Invasion of Ukraine," ifo Working Paper Series 371, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    16. Aydin Yildirim & Robert Basedow & Matteo Fiorini & Bernard Hoekman, 2021. "EU Trade and Non‐trade Objectives: New Survey Evidence on Policy Design and Effectiveness," Journal of Common Market Studies, Wiley Blackwell, vol. 59(3), pages 556-568, May.
    17. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2024. "To Cut or not to Cut: Deforestation Policy under the Shadow of Foreign Influence," Working Papers 1441, Barcelona School of Economics.
    18. Koppenberg, Maximilian & Mishra, Ashok K. & Hirsch, Stefan, 2023. "Food Aid and Violent Conflict: A Review of Literature," IZA Discussion Papers 16574, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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