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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 a home country's main trade partner may influence the course of regime change. The foreign country intervenes in support of the group that draws the largest gains from trade, since such a group is willing to concede most in trade agreements. But interventions are more than offset by the domestic political system, which supports in power the group that concedes least (economic nationalism). I allow for geopolitical competition between the main trade partner and a second foreign country as well as for domestic ideological preferences over the two and look at how geopolitical competition interacts with the economic mechanism described above. My results help interpret some of the patterns of Western interventions in the 20th century and the role of economic nationalism in regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for incumbent elites, even when the oppositions did not have a strong communist ideology. I provide detailed historical evidence in favour of my arguments. Une théorie économique des interventions étrangères et le changement de régime. On construit une théorie des interventions étrangères dans laquelle le principal partenaire commercial du pays d'origine peut influer sur le changement de régime. Le pays étranger intervient pour supporter le groupe qui tire les gains les plus importants du commerce international, puisqu'un tel groupe est susceptible de concéder le plus dans ces accords commerciaux. Mais ces interventions sont plus que compensées par le système politique du pays d'origine, qui supporte le groupe qui concède le moins (nationalisme économique). On tient compte de la concurrence géopolitique entre le principal partenaire commercial et un second pays étranger, ainsi que des préférences idéologiques locales sur les deux fronts, et de la manière dont la concurrence géopolitique interagit avec les mécanismes économiques décrits plus haut. Les résultats de l'analyse aident à interpréter les patterns d'interventions occidentales au 20e siècle, et le rôle du nationalisme économique dans les changements de régimes. De plus, ils aident à expliquer pourquoi la Guerre Froide a renforcé les préférences des pays de l'Ouest pour les élites en place, même quand les oppositions n'avaient pas de forte idéologie communiste. L'auteur fournit un support historique à son argumentaire.

Suggested Citation

  • Roberto Bonfatti, 2017. "An economic theory of foreign interventions and regime change," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(1), pages 306-339, February.
  • Handle: RePEc:wly:canjec:v:50:y:2017:i:1:p:306-339
    DOI: 10.1111/caje.12258
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    References listed on IDEAS

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    1. Arindrajit Dube & Ethan Kaplan & Suresh Naidu, 2011. "Coups, Corporations, and Classified Information," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1375-1409.
    2. Masahiro Endoh, 2012. "Cross-border political donations and Pareto-efficient tariffs," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(4), pages 493-512, July.
    3. Ticchi, Davide & Vindigni, Andrea, 2007. "War and endogenous democracy," POLIS Working Papers 97, Institute of Public Policy and Public Choice - POLIS.
    4. Daniel Berger & William Easterly & Nathan Nunn & Shanker Satyanath, 2013. "Commercial Imperialism? Political Influence and Trade during the Cold War," American Economic Review, American Economic Association, vol. 103(2), pages 863-896, April.
    5. 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 & Esther Hauk, 2019. "Foreign in influence and domestic policy: A survey," Cambridge Working Papers in Economics 1928, Faculty of Economics, University of Cambridge.
    2. Aidt, Toke S. & Albornoz, Facundo & Gassebner, Martin, 2018. "The golden hello and political transitions," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 157-173.
    3. Toke S. Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross-National Externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 272-297, February.
    4. Abu-Bader, Suleiman & Ianchovichina, Elena, 2019. "Polarization, foreign military intervention, and civil conflict," Journal of Development Economics, Elsevier, vol. 141(C).
    5. Garcia-Alonso, Maria D.C. & Levine, Paul & Smith, Ron, 2016. "Military aid, direct intervention and counterterrorism," European Journal of Political Economy, Elsevier, vol. 44(C), pages 112-135.
    6. Toke S. Aidt & Facundo Albornoz & Esther Hauk, 2019. "Foreign influence and domestic policy," Discussion Papers 2019-03, University of Nottingham, GEP.
    7. Aidt, Toke S. & Albornoz, Facundo & Gassebner, Martin, 2018. "The golden hello and political transitions," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 157-173.

    More about this item

    JEL classification:

    • 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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