The Hidden Hand of Economic Coercion

Abstract

Why do policymakers consistently employ economic sanctions even though scholars consider them an ineffective tool of statecraft? Game-theoretic models of economic coercion suggest the success rate may be understated because of selection effects. When the targeted country prefers conceding to incurring the cost of sanctions, it has an incentive to acquiesce before the imposition of sanctions. The bulk of successful coercion episodes should therefore end with sanctions threatened but not imposed. This contradicts the recent literature on sanctions, which assumes that sanctions rarely, if ever, work at generating significant concessions from the targeted country and are imposed for domestic or symbolic political reasons. If the game-theoretic argument is correct, the crucial cases to study are those in which coercion is threatened but not implemented. A statistical analysis of data on sanctions in pursuit of economic or regulatory goals strongly supports the gametheoretic argument. These results suggest that the significance of economic coercion has been undervalued in the study of statecraft and international relations more generally.