William H. Kaempfer

Unilateral Versus Multilateral International Sanctions: A Public Choice Perspective

Multilateral economic sanctions can be expected to impose greater terms-of-trade effects on a target nation than unilateral sanctions. Yet despite their potential for greater economic damage, multilateral sanctions often are less effective in bringing about desired political results in the target. An interest-group model of endogenous policy suggests that multilateral sanctions can undermine the political effectiveness of opposition groups in the target country, or strengthen those groups supporting the objectionable policy of the ruling regime. Such perverse effects are due in part to the inability of multilateral coalitions to enforce cooperation among members, and to the appropriation of sanctions rents in the target country. Unilateral sanctions, however, imposed by a country with close ties to the target, are often effective in achieving their intended political objectives.

Instrument Choice and the Effectiveness of International Sanctions: A Simultaneous Equations Approach

The literature on economic sanctions suggests that the choice of policy instrument, for example trade sanctions, financial sanctions, or military intervention, is endogenous to the political process and, in particular, to the policy outcome sought by the sanctioner. But the choice of instrument also affects the outcome of the sanctions. Therefore, the sanctions policy outcome and the probabilities of the sanctioners adoption of different sanctions instruments are jointly determined. To capture this endogeneity, multivariate probit and logit models are estimated using data from Hufbauer, Schott & Elliott, with the random utilities to the sanctioner of choosing military action, trade sanctions, and financial sanctions as dependent variables. The expected probabilities of choosing these alternatives are then incorporated as explanatory variables in predicting the success of the sanctions in attaining their political objectives. This procedure generates simultaneous estimates of the determinants of both instrument choice and sanctions success. The empirical results indicate that military force is less likely to be used against an economically healthy and politically stable target than against a more vulnerable target. However, military action is encouraged by third-country assistance to the sanctioned country and by a high cost of sanctions to the sanctioner. Financial sanctions are more likely to be used against a target that receives third-country support but are less likely against an economically healthy country. Sanctions success is positively correlated with the degree of warmth in relations between sanctioner and target prior to the sanctions; negatively correlated with the size of the sanctioner relative to the target; and negatively correlated with the economic health and political stability of the target. There is no evidence that third-country assistance to the target diminishes the effectiveness of sanctions or that the cost of sanctions to either the target or the sanctioner has a strong effect on the sanctions outcome.

Divestment, investment sanctions, and disinvestment: an evaluation of anti-apartheid policy instruments

Pressure for divestment and mandatory disinvestment sanctions directed against South Africa are an instance of domestic interest groups in one country seeking policy change in another. The link from shareholder divestment to disinvestment by firms is tenuous, however (since South Africa-active firms do not seem to suffer as a consequence of divestment pressure), and legislated sanctions are likely to have unpredictable and sometimes perverse effects on the extent of apartheid practices.

Using threshold models to explain international relations

The outcome of political opposition or revolution is a public good, which suggests that free riding will diminish the effectiveness of these forms of collective action. The private gains from contributing to collective goals are increased, however, if individuals place some value on ideological conformity or group identity. Nevertheless, some external stimulus is often needed to set in motion a tendency toward social motivation that is strong enough to outweigh the free rider incentive. This paper investigates the extent to which international pressure and demonstration effects can serve to signal support for the objectives of domestic groups in a target country and thereby mobilize collective action in pursuit of their goals. It is of interest to know not only the extent to which inherent barriers to effective collective action are overcome by outside support, but also to show how foreign economic policy can have an impact on political processes in the target country even when that policy itself has minimal economic effects.

Incremental protection and efficient political choice between tariffs and quotas

This paper offers a new political economy explanation for the increasing use in recent years of quotas instead of, or in combination with, tariffs as a form of trade protection. The authors show that, under domestic monopoly, the comparative efficiency of tariffs and quotas in achieving political objectives will vary depending on the nature of the market and the level of protection. At high levels of protection, quotas can become more politically efficient than tariffs. They also show that, at low levels of protection, a price equivalent quota may not exist.

A Threshold Model of Electoral Policy and Voter Turnout

Voter turnouts differ significantly across societies, and in some polities voting is compulsory. To explain differences in voter turnout it is necessary first to explain the variation in compulsion policies that exists across societies. A threshold model of collective action is used to provide an explanation for compulsion policies, which are treated as endogenous. Governments and parties are viewed as “demanding” turnout as a means to enhance political support. This theory suggests that voter turnout is high, and possibly government mandated, in societies that have high levels of political polarization and that use proportional representation. The predictions of the theory are tested using cross-country data.

Testing the endogeneity of tariff policy in the U.S. : Further evidence

Abstract Endogenous tariff theory suggests tariffs are created in response to self-interested political pressure. Using a VARMA model covering the period 1890–1970 in the U.S., we show that macroeconomic variables which proxy political pressure Granger-cause the tariff.

The balance of payments approach to trade tax symmetry theorems

ZusammenfassungDer Zahlungsbilanzansatz für die Theoreme der Steuersymmetrie im Au\enhandel. — In diesem Aufsatz wird zur Symmetrie zwischen Einfuhr- und Ausfuhrsteuern zweierlei festgestellt. Erstens: Wenn man die Steuer bei allen Positionen auf der Sollseite einer Zahlungsbilanz um die gleiche Summe erhöht wie die Zuschüsse für alle Positionen auf der Habenseite, dann ist die Erhöhung in dem Sinne neutral, da\ alle realen und nominalen Variablen unverÄndert bleiben. Diese Aussage gilt für alle Marktstrukturen, Wechselkurssysteme und Arten internationaler Transaktionen ebenso wie für den Fall, da\ viele Güter international gehandelt werden, für Zölle, die in der Ausgangssituation grö\er als Null sind, und unabhÄngig davon, ob die Annahme eines Zahlungsbilanzgleichgewichts gemacht wird oder nicht. Zweitens wird behauptet, da\ in plausiblen Modellen die Symmetrie auch bei unvollkommener Konkurrenz bestehen bleibt. Dies erscheint als eine nützliche Generalisierung des Lerner-Theorems, weil die logische Struktur des Theorems deutlich herausgestellt wird.RésuméL’approche de balance des paiements aux théorèmes des symétries de taxe sur le commerce. — Dans cet article nous nous occupons avec deux aspects de la symétrie entre les taxes importatrices et exportatrices. Premièrement, l’augmentation de la taxe sur tous les débits de la balance des paiements et de la subvention sur tous les crédits de la balance des paiements d’un montant égal est neutre sur ce point qu’elle ne change pas les variables nominales et réelles. De plus, cela est juste pour toutes les structures du marché, les systèmes du taux de change et les variétés des transactions internationales ainsi que pour le cas de plusieurs biens et des tarifs non-zéro au début et aussi indépendamment de la supposition que la balance des paiements est en équilibre. Deuxièmement, nous arguons que dans les modèles plausibles la symétrie continue d’exister mème s’il y a une concurrence imparfaite. C’est une généralisation utile du théorème de Lerner car il met en évidence la structure logique du théorème.Resumen:Balanza de pagos y teoremas de la simetría del impuesto sobre el commercio exterior. — En este estudio se discuten tres aspectos de la simetria entre impuestos sobre la importación y exportatión. En primer lugar, un aumento del impuesto sobre el pasivo de la balanza de pagos correspondido exactamente por un aumento del subsidio al activo de la balanza, deja todas las variables, reaies y nominales, inalteradas y es por lo tanto neutral. Esto tiene además validez para todo tipo de estructuras de mercado, sistemas de tipo de cambio, variedad de transacciones internacionales y para muchas mercaderias y tarifas iniciales que no sean nulas. En segundo lugar, se discute que la simetría permanece en presencia de competencia imperfecta en algunos modelos plausibles.

Cigarette demand and tax policy for race groups in South Africa

This paper calculates cigarette demand for race groups in South Africa. Elasticities are the most important information a tax policy analyst can have. Elasticities determine how the tax base will change with a change in the tax rate and thus how government revenues will respond to the tax. Elasticities also determine the excess burden that consumers will bear as a result of the tax. As such, own price, crossprice, and expenditure elasticities are calculated along with government revenue maximizing tax rates, and total and excess burdens. Parametric and semiparametric estimation techniques are used and compared. Results show that a tax on cigarettes will discourage nonsmokers from starting to smoke and mainly raise revenue from current smokers. Furthermore, it is found that consumption behaviours between groups are different implying different government revenue maximizing tax rates for each group affecting the distribution of income.

A Public Choice Analysis of the Political Economy of International Sanctions

The notion that the causes and effects of international economic sanctions are channelled through domestic politics in both the sanctioning and target countries is certainly nothing new to the international relations literature. In identifying expressive as opposed to instrumental impacts, Galtung (1967) suggested that economic sanctions might be usefully viewed as political signaling devices. Lindsay (1986) discussed the symbolism of sanctions both in regard to domestic and international constituencies. More recently, Morgan and Schwebach (1996) have used a spatial bargaining model to show that sanctions can be successful in attaining their political objectives in the target country under certain circumstances if the sanctions impose significant costs on politically powerful segments of the target society.