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Theocracy and Resilience Against Economic Sanctions

Author

Listed:
  • Alireza Naghavi

    () (University of Bologna and Centro Studi Luca d'Agliano)

  • Giuseppe Pignataro

    () (University of Bologna)

Abstract

This paper provides a simply theory to explain the impact of sanctions on a regime's policies and behavior. Sanctions are generally put to strip the target country from its available rents and weaken the government's stance against growing discontent in the population. We show however that sanc-tions may give legitimacy to an incumbent government by influencing the optimal level of religious ideology provided by the state and further stabilizing its grip to power and rents. While in a good state of nature sanctions build resilience as long as religious ideology among the population is strong, at bad times they compel the target country to move towards ideological moderation. In a world of asymmetric information, the target country always finds it optimal to send a signal that tru-ly represents the prevailing state of nature in order to induce learning and reach a win-win outcome.

Suggested Citation

  • Alireza Naghavi & Giuseppe Pignataro, 2015. "Theocracy and Resilience Against Economic Sanctions," Development Working Papers 383, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:383
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    File URL: http://www.dagliano.unimi.it/media/WP2014_383.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mohammad Reza Farzanegan & Mohammad Mohammadikhabbazan & Hossein Sadeghi, 2015. "Effect of Oil Sanctions on the Macroeconomic and Household Welfare in Iran: New Evidence from a CGE Model," MAGKS Papers on Economics 201507, Philipps-Universit├Ąt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Jo Thori Lind & Daniel Chen, 2016. "The Political Economy Of Beliefs: Why Fiscal And Social Conservatives/Liberals Come Hand-In-Hand," 2016 Meeting Papers 606, Society for Economic Dynamics.
    3. Farzanegan, Mohammad Reza & Raeisian Parvari, Mozhgan, 2014. "Iranian-Oil-Free Zone and international oil prices," Energy Economics, Elsevier, vol. 45(C), pages 364-372.

    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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