An economic theory of foreign interventions and regime change
Bonfatti, Roberto (2016) An economic theory of foreign interventions and regime change. Canadian Journal of Economics . ISSN 1540-5982 (In Press)
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 who 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 favor of my arguments.
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