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 within sanctioned countries? More specifically, do economic sanctions diminish or bolster their political support for incumbent governments? Despite the significance of these questions for understanding the effectiveness of sanctions, existing evidence remains inconclusive. We argue that individuals targeted by sanctions tend to increase their political support for the incumbent through two mechanisms: the "rally-round-the-flag" effect and the "vote-buying" effects. Empirically, we leverage Beijing's abrupt restriction on cross-strait tourism as a natural experiment, providing observational evidence to quantify its political impact on Taiwanese tourism workers. Using 19 waves of quarterly surveys conducted from 2017 to 2022 in Taiwan, a difference-in-differences estimation and matching methods reveal that tourism workers exhibited increased support for the incumbent leader following the sanction. Notably, this effect is primarily driven by opponents, rather than supporters, of the incumbent, as well as tourism works receiving more government subsidies. Similar patterns are observed in Beijing's sanction on Taiwan's agricultural products, further validating the findings.

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