Foreign Influence and Domestic Policy: A Survey

50 Pages Posted: 29 Mar 2019

See all articles by Toke Skovsgaard Aidt

Toke Skovsgaard Aidt

University of Cambridge - Faculty of Economics and Politics

Facundo Albornoz

University of Birmingham

Esther Hauk

Instituto de Análisis Económic (IAE) Barcelona

Date Written: 2019

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 inflencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes many forms. We distinguish three broad types of intervention strategies, (i) voluntary agreement interventions between the intervening foreign power and the target country, (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 policy choice by changing the political institutions in the target country (with or without a civil war). We propose a unifying theoretical framework to understand when and which form of foreign influence is chosen and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines. Foreign intervention plays a more important role for a proper understanding of domestic policy choices, for institutional dynamics and for internal conflict than is commonly acknowledged in both empirical and theoretical research.

Keywords: foreign influence, international agreements, institutions, aid, sanctions, conflict

JEL Classification: D700, D720, D740, F130, F230, F510, F530

Suggested Citation

Aidt, Toke Skovsgaard and Albornoz, Facundo and Hauk, Esther, Foreign Influence and Domestic Policy: A Survey (2019). CESifo Working Paper No. 7567. Available at SSRN: https://ssrn.com/abstract=3362020

Toke Skovsgaard Aidt (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 33 5231 (Phone)
+44 1223 33 5475 (Fax)

Facundo Albornoz

University of Birmingham ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Esther Hauk

Instituto de Análisis Económic (IAE) Barcelona ( email )

Barcelona, Bellaterra 08193
Spain

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