Structural estimation of economic sanctions

Abstract

When are economic sanctions expected to succeed? Previous studies predict that sanctions will be more effective when the issue at stake is important, when the sender and target are allied, when the target’s domestic institutions are more democratic, and when the target’s economy is dependent on the sender’s. This article subjects these explanations to an empirical test using a new fully structural estimation that employs a game theoretic model as a statistical model. The initiation and outcomes of sanctions are incorporated with the strategic behaviors of sender and target states into a unified model. The model improves upon extant models by allowing the initial choice of the sender states to be multiple, not binary. This non-binary option enables the sender states to opt for the optimal intensity level of sanctions. Findings suggest that issue salience is positively associated with the decision to impose sanctions, but not necessarily with their effectiveness. Further, allied targets tend to comply even when they can win a sanctions contest, while non-allied targets tend to resist even when they know that on average the sender is likely to continue sanctioning in the face of resistance. Since sanctions imposed from 1903 to 2002 take place disproportionately between non-allied dyads, and thus belong to the category of sanctions most likely to fail, we can begin to understand why sanctions have such a low success rate.

How the possibility of a fight-back strategy affects the consequences of a sanctions regime

“…(Chen, Fu, Zhao, Yuan, & Chang, 2019) 3) Theoretical studies investigate the sanctions as a general issue and try to anticipate the results and outcomes of sanctions and determine the conditions under which these forecasts are valid. The main group of the theoretical studies of sanctions use game theory as a useful framework for analyzing the reciprocal effects of the actions of different countries and international players (Brown, 2019;Dong & Li, 2018;Eaton & Engers, 1992, 1999Lacy & Niou, 2004;McCormack & Pascoe, 2015;Morgan & Bapat, 2003;Rapelanoro & Bali, 2020;Shadiqi & Pradiptyo, 2011;Simon, 1995;Taehee Whang, 2010;Tsebelis, 1990;Whang & Kim, 2015). In these kinds of studies, the whole entity of a nation-state is considered as a rational player which seeks to maximize its interests regarding the other players' actions.…”

“…• the structure of the game which is either simultaneous or sequential (Eaton & Engers, 1992;Taehee Whang, 2010) • the incomplete information (Eaton & Engers, 1999) • whether the threat to sanction is a choice or not (Afesorgbor, 2019;Lacy & Niou, 2004) • mixed strategy analysis (Shadiqi & Pradiptyo, 2011) • players' perception (Whang & Kim, 2015) • repetition of the game (McCormack & Pascoe, 2015;Veebel & Markus, 2018a) • players in addition to/except the sender and the target (Dong & Li, 2018;McLean & Whang, 2010;Morgan & Bapat, 2003) • the power of the targeted country (Brown, 2019) Game theory and some other methods have also been fruitful in explaining some parameters' effect on the results of a sanction episode. These parameters include:…”

“…• the importance of a sanction episode (Drezner, 1999) • the cost of sanctions for the sender (Dong & Li, 2018;Whang & Kim, 2015) • the stability and power of the leaders in the target country (Spaniel & Smith, 2015) • the power of the military force in the target country (McCormack & Pascoe, 2015) • the economic and political relations between the two countries (Taehee Whang, 2010) • the behavior of third parties (Han, 2018) • the effects of a countermeasure on individuals in both parties (Banse, Duric, Götz, & Laquai, 2019), or on the outcome of the game (Saparaliyev, Mokin, Movkebayeva, Saiymova, & Mustafina, 2019;Veebel & Markus, 2018a) • the cost of sanctions on the target (Bimbetove et al, 2019;Dong & Li, 2018;Gharibnavaz & Waschik, 2018;Salman, Shin, & Shin, 2019) • the internal dynamics of both countries and the role of the opposition party (Onder, 2020) The intensity of sanctions imposed on controversial policies of target states has been also discussed within public choice framework (Kaempfer & Lowenberg, 1988).…”

“…Recent studies on modeling sanctions using game theory have not considered sanction games as infinite games. So the alternative method to model such a situation is to consider it as a one-time game, either simultaneous or sequential, as in (Brown, 2019;Dong & Li, 2018;Eaton & Engers, 1999;Lacy & Niou, 2004;McCormack & Pascoe, 2015;Morgan & Bapat, 2003;Shadiqi & Pradiptyo, 2011;Simon, 1995;Taehee Whang, 2010;Tsebelis, 1990). This method is more straightforward to be solved and the equilibria in such models are computed without difficulty.…”

Talking to the hand: Bargaining, strategic interaction, and economic sanctions

“…This is due to strategic interaction: in those cases where sanctions would induce targets to alter their behavior, targets can anticipate this when sanctions are threatened and change their policies before sanctions actually occur. This insight has led scholars to examine the existence of selection effects (Drezner 2001(Drezner , 2003Blake and Klemm 2006;Miller, 2014) and to incorporate selection processes in empirical models (Nooruddine 2002;Souva 2003, 2007;Whang, 2010;Whang, et al, 2013;Peterson 2013), as well as to collect a new dataset that includes cases of sanctions threats (Morgan, Bapat, and Krustev 2009).…”