Political Backlash of Economic Sanctions: Evidence from Beijing's Restriction on Cross-strait Tourism

Abstract

How do economic sanctions affect the political attitudes of individuals working in targeted industries in the sanctioned countries? More specifically, do economic sanctions reduce or increase their political support of incumbent governments? Despite the importance of these questions for understanding the effectiveness of sanctions, existing evidence remains inconclusive. This article demonstrates a "distributional backlash": the targets of sanctions strengthen their political support of the incumbent because of supportive industrial policies. Empirically, we leverage Beijing's sudden restriction on cross-strait tourism to estimate its political impact on Taiwanese tourism workers based on 19 waves of quarterly surveys from 2017 to 2022 in Taiwan. Difference-indifferences estimation reveals tourism practitioners' increasing support of the incumbent leader after the sanction. Such effects are mainly driven by the opponents instead of supporters of the incumbent. Furthermore, based on an original dataset, government subsidies significantly contribute to promoting tourism practitioners' political support for the incumbent after Beijing's sanction. Consistent patterns are found in another sanction by Beijing on Taiwan's agricultural products.

Keywords: Sanction, Cross-strait Relations, Political Backlash, China