An Economic Theory of Foreign Interventions and Regime Change

52 Pages Posted: 6 Jun 2011

See all articles by Roberto Bonfatti

Roberto Bonfatti

University of Nottingham, UK; University of Padua

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2011

Abstract

I construct a theory of foreign interventions in which the preferences of the foreign country over alternative local groups are determined by each group's international economic ties. In equilibrium, the foreign country supports the group with which it has the strongest ties, since this is most influenceable from the outside. However, this is counter weighted by the tendency of the domestic political system to favor the least influenceable group. I allow for a non-economic dimension of policy (geopolitics), and study how the saliency of this dimension may play in favor of the incumbent group. My results help interpret the economic rationale for many Western interventions in developing countries in the 20th century, and the role of economic nationalism in motivating the struggle for regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for specific local groups. I provide detailed historical evidence in favor of my arguments.

Keywords: regime change, foreign interventions, economic power, economic nationalism, Cold War, Latin America

JEL Classification: D700, F100, F500, N400

Suggested Citation

Bonfatti, Roberto, An Economic Theory of Foreign Interventions and Regime Change (May 31, 2011). CESifo Working Paper Series No. 3475, Available at SSRN: https://ssrn.com/abstract=1858635 or http://dx.doi.org/10.2139/ssrn.1858635

Roberto Bonfatti (Contact Author)

University of Nottingham, UK ( email )

United Kingdom

University of Padua

via Del Santo 33
Padova, 35123
Italy

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