bargaining enforcement and multilateral sanctions when is cooperation counterproductive scholars and policymakers generally assume that multilateral cooperation is a necessary condition for economic sanctions to be of any use however previous statistical tests of this assumption have shown that sanctions are more successful with lower levels of cooperation this puzzle calls into question established theories of economic statecraft as well as theories of international cooperation in this article i test possible explanations for the ineffectiveness of multilateral cooperation on sanctions events using james fearon s 1998 breakdown of cooperation into bargaining and enforcement phases as a framework for discussion the empirical results show that when multilateral economic sanctions fail their failure is due to enforcement not bargaining problems without the support of an international organization cooperating states backslide from promises of cooperation backsliding occurs because of domestic political pressures and uncertainty about the intentions of the other sanctioning countries backsliding causes an initial burst of cooperative behavior to decay over time without institutional support cooperation is worse than useless it is counterproductive this result suggests that international cooperation is a more fragile equilibrium than previously thought but undercuts realist arguments that international organizations are unimportant

simple contracts renegotiation under asymmetric information and the hold up problem abstract in this article it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non trivial it is argued that the default decision may be interpreted as a simple contract that the parties have written ex ante this result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold up problem to be solved even if the parties valuations are private information

international sanctions as international punishment much of the contemporary literature on the utility of international sanctions approaches the apparent riddle of why sanctions are embraced so eagerly when they are supposedly such an ineffective tool of statecraft by focusing on the instrumental and rational purposes of sanctions as a result one purpose that does not always lend itself to a rational means end calculus the purpose of punishment tends to be overlooked or more commonly dismissed outright this article explores punishment as both a useful and an effective purpose of international sanctions it argues not only that sanctions should be distinguished from other forms of hurtful statecraft but also that they are a form of international punishment for wrongdoing despite the difficulties of applying the term punishment in the context of international relations the article then examines the purposes of punishment and reveals that only some are understandable when a model of means end rationality is used suggesting that the element of the nonrational also plays an important role in international sanctions the argument is then applied to the case of u s sanctions imposed after the soviet union s invasion of afghanistan to demonstrate the different purposes of punishment at work in this case the article concludes that just as we cannot understand punishment as a purposive human activity solely by reference to a rational model of a means to a clearly delineated end so too we cannot entirely understand sanctions as a form of international punishment by an attachment to a rational model of policy behavior however some forms of punishment are exceedingly effective and this may explain why sanctions continue to be a popular instrument of statecraft

strategic interaction and the statistical analysis of international conflict although strategic interaction is at the heart of most international relations theory it has largely been missing from much empirical analysis in the field typical applications of logit and probit to theories of international conflict generally do not capture the structure of the strategic interdependence implied by those theories i demonstrate how to derive statistical discrete choice models of international conflict that directly incorporate the theorized strategic interaction i show this for a simple crisis interaction model and then use monte carlo analysis to show that logit provides estimates with incorrect substantive interpretations as well as fitted values that can be far from the true values finally i reanalyze a well known game theoretic model of war bueno de mesquita and lalman s 1992 international interaction game my results indicate that there is at best modest empirical support for their model

on the determinants of the success of economic sanctions an empirical analysis theory theories predicting the success of economic sanctions are tested on the universe of sanction episodes from 1914 to 1989 hypotheses the probability of success depends upon the cost to the target nation the extent of trade linkages between target and sender the stability of the target the amount of time sanctions are in force and whether financial sanctions are utilized method data are analyzed using logistic regression results the factors affecting success depend upon the goals of the sending nations when that goal is simply destabilization the principal determinant of success is the initial stability of the target for other goals the use of financial sanctions is most effective we also find evidence of a modest downward trend over time in the relative effectiveness of sanctions in the latter category

urbanization informal sector and development abstract urbanization is a universal phenomenon in the postwar world but its qualitative nature is varied across countries some nations have experienced urbanization that accompanied skill upgrading industrialization and the expansion of the urban formal modern sector but others urbanized without such modernization and underwent the expansion of the urban informal traditional sector simultaneously the question that naturally arises is what are the underlying causes for the differences the purpose of the paper is to tackle this question analytically based on a dynamic model of urbanization and development

foreign investment in the presence of an informal sector in the context of a segmented economy in which the urban unemployed subsist in informalsector activities earl grinols has recently questioned conventional wisdom whereby foreign investment with repatriated earnings is necessarily immiserizing for the host country in this paper we extend grinols s analysis and place it in a broader context permitting richer conceptions of informal sector activities our principal finding is that the original insight is surprisingly robust once heckscher ohlin samuelson factor intensities are suitably modified and interpreted our models may also have independent interest for other work on the informal sector

on renegotiation design a central concern of contract theory is to investigate departures from the first best paradigm in which rational agents could in principle achieve unrestrained efficiency through complete long term contingent contracts in order to take into account some of the observed limitations in real life contracts attention has been paid to informational problems one focus has been on asymmetries of information between contractors adverse selection and moral hazard have been used for example to analyze insurance problems labor contracts managerial incentives regulation of monopolies vertical restraints or the financial structure of firms see for example hartholmstrom 1987 for a survey of these issues attention has also been devoted to private information shared by the parties but unavailable to outsiders like courts that is observable but unverifiable information asymmetries of information between contractors introduce constraints which indeed most often prevent to achieve first best efficiency unfortunately this paradigm involves technical difficulties which explains why most contributions focus on unidimensional asymmetries and may leave some undeterminacies as to the form of optimal contracts e g if there are more than one asymmetry or the size of the inetliciencies there may for instance exist several equilibria which are more or less inefficient the last paradigm observable but unverifiable information is technically more convenient what is not clear however is the extent to which the presence of unverifiable information may prevent achieving first best

rural urban migation informal sector and development policies a theoretical analysis abstract a theoretical model of rural urban migration has been developed with special reference to the informal sector the wage rate and employment in the informal sector are determined endogenously the paper shows the simultaneous existence of open unemployment and informal sector in the urban area in migration equilibrium the effects of alternative subsidy policies on unemployment and welfare of the workers are studied

informal sector and informal capital market in a small open less developed economy abstract a three sector static model of a small open economy has been developed with special consideration to the urban informal sector and the informal capital market informal capital is mobile between the rural sector and the urban informal sector policy effects in this model appear to be different from those analysed in other three sector models

specific investments holdup and the outside option principle according to the outside option principle the holdup problem can be solved when the non investor has a binding outside option the investor then becomes residual claimant creating efficient investment incentives this paper reports about an experiment designed to test this we find that when the outside option is binding investment levels fall short of the efficient level but holdup is less of a problem than predicted when the outside option is non binding

theocracy and resilience against economic sanctions abstract this paper provides a simply theory to explain the impact of sanctions on a regime s policies and behavior sanctions are generally put to strip the target country from its available rents and weaken the government s stance against growing discontent in the population we show however that sanctions may give legitimacy to an incumbent government by influencing the optimal level of religious ideology provided by the state and further stabilizing its grip to power and rents while in a good state of nature sanctions build resilience as long as religious ideology among the population is strong at bad times they compel the target country to move towards ideological moderation in a world of asymmetric information the target country always finds it optimal to send a signal that truly represents the prevailing state of nature in order to induce learning and reach a win win outcome

domestic opposition and signaling in international crises this article explores the effect of domestic political competition on the escalation of international crises it combines an incomplete information model of crisis bargaining with a simple model of two party electoral choice one state has two strategic actors a government and an opposition party both of which declare openly whether they support the use of force to alter the status quo the rival state updates its beliefs and selects its strategy in response to both signals the parties payoffs depend upon a retrospective evaluation by the domestic electorate the model shows that the inclusion of a strategic opposition party decreases the ex ante probability of war by helping to reveal information about the state s preferences this finding has important implications for research on democracy and international conflict since it suggests a mechanism through which democratic states can overcome informational asymmetries which have been identified as a central obstacle to negotiation

migration trade unions and the informal sector a note on calvo tends to be very sticky a feature which renders some of the standard policies for reducing urban unemployment or underemployment totally ineffective in particular it is observed that in the calvo model a first best optimum cannot be obtained without the imposition of some migration barriers in this note we attempt to generalize the calvo model by incorporating the following new features first we distinguish between the two components of the urban sector the modern formal part and the traditional informal part secondly the individuals are assumed to migrate from the rural to the urban sector in response to a differential in expected utility rather than in expectedincome thereby highlighting the role of risk aversion in individual migration decisions finally following the new literature on trade union behavior 2 the present model posits a utilitarian objective function for the trade union a formulation which is considered an improvement over the one put forward by calvo an important conclusion of the present exercise which sharply contrasts calvo s conclusion is that the government by setting its policies correctly can achieve a first best optimum for the economy this difference in result is due obviously to the differences in specification in particular of the objective function of the trade union

does high income promote democracy the authors construct a statistical model with which to test whether the regularity that democracy is more commonly found among wealthy countries stems from a democratizing effect of high income or is due entirely to other factors such as the historical context various features of the institutional setting and simultaneity with the process of leadership change even after correcting for these many other influences the democratizing effect of income remains as a statistically significant factor promoting the emergence of democratic political institutions the authors go on to find that leaders risks of losing power rise during their time in office and that these risks are higher in more democratic countries the authors confirm the finding by burkhart and lewis beck that the democracy promoting effect of income is stronger among the european countries they suggest that high income has a more powerful democratizing effect among the southern european countries because it interacts with pressure from major trading partners to democratize this suggests a revaluation of policies designed to foster the replacement of authoritarian regimes by democratic ones through free trade

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

unemployment and foreign capital the relative opportunity costs of domestic labour and welfare the consequences of increased foreign capital for an economy with unemployment are analyzed under different assumptions that influence the relative oportunity costs of domestic labor the investigation suggests that the implications of the literature on the welfare effect of increased foreign capital are misleading the paper shows that welfare gains result from increased foreign capital if the opportunity costs of labor are sufficiently low relative to the wages earned by laborers employed by new foreign capital a number of cases where this occurs are presented the findings of the paper suggest that cases where increased foreign capital must be welfare harming represent extreme parameterizations in the set of possibilities copyright 1991 by the london school of economics and political science

the political effectiveness of terrorism revisited terrorists attack civilians to coerce their governments into making political concessions does this strategy work to empirically assess the effectiveness of terrorism the author exploits variation in the target selection of 125 violent substate campaigns the results show that terrorist campaigns against civilian targets are significantly less effective than guerrilla campaigns against military targets at inducing government concessions the negative political effect of terrorism is evident across logit model specifications after carefully controlling for tactical confounds drawing on political psychology the author concludes with a theory to account for why governments resist compliance when their civilians are targeted

holdups simple contracts and information acquisition abstract in a typical procurement setup several recent papers have shown that when complete contracting is not possible simple noncontingent contracts may suffice to solve the under investment problem this paper points out that a noncontingent contract offer such as a fixed price contract may induce the seller to acquire information on the future course of costs and only to accept the offer if the cost is low it is shown that sometimes the buyer prefers to wait and buy on the spot market than to offer a long term contract when the seller rejects a contract offer or the buyer chooses not to make one the seller will not make efficient investments because he expects to be held up on the spot market

economic interdependence bargaining power and political influence bargaining theory is used to evaluate the proposition that asymmetrical economic interdependence among states is a source of political power it is shown that asymmetrical economic interdependence does not imply that less dependent actors will be able to exercise political influence over more dependent ones the use of economic interdependence for political influence requires instead that the exchange of economic resources for political concessions make both parties to a relationship better off than they would be if they bargained over the distribution of the gains from the economic relationship alone whether this is true is independent of the degree of asymmetry in the economic relationship or its direction an explanation is given for the fact that other scholars have reached different conclusions and the implications of these results for our understanding of a variety of types of relations among governments are derived

precision guided or blunt the effects of us economic sanctions on human rights this study analyzes the consequences of economic sanctions for the target country s human rights situation we offer a political economy explanation for different types of human rights infringements or improvements in reaction to economic shocks caused by sanctions based on that explanation we derive hypotheses linking sanctions to four types of human rights economic rights political and civil rights basic human rights and emancipatory rights we use endogenous treatment regression models to test those hypotheses by estimating the causal average treatment effect of us economic sanctions on each type of human rights within a uniform empirical framework unlike previous studies we find no support for adverse effects of sanctions on economic rights or basic human rights once the endogenous selection of sanctioned countries is modelled with respect to women s rights our findings even indicate a positive effect of sanctions that is associated with improvements in women s economic rights only our results for political rights and civil liberties suggest significant deterioration under economic sanctions we conclude that it is important to account for the potential endogeneity of economic sanctions and to distinguish different dimensions of human rights as the effects of economic sanctions along those dimensions may vary considerably

implicit interest rates usury and isolation in backward agriculture the unusually high interest rates in many backward agricultural regions have been a source of some puzzlement to economists adding to this puzzle is the fact that these rates can take on a wide range of values often within the same region one important question is why arbitrage between sectors does not lead to more homogeneous and lower interest rates the traditional answer to this is in terms of lender s risk it is argued that moneylenders in backward regions face a great risk of default and once this is taken into account the effective interest rate turns out to be no higher than its counterpart in the organised sector consequently there is no real room for arbitrage and the high interest rates are equilibrium prices while this explanation may be of use in some situations it is in general inadequate and can even be misleading the reason which novelists describing rural india have repeatedly written about is that in these financial transactions the lender s risk frequently ranges from minimal to non existent because the personalised relation between the borrower and the lender enables the latter to extract the defaulted loan in the form of asset transfers from the borrower in a somewhat stylised manner these deals could be thought of as follows a peasant takes a loan from his employer keeping some of his assets like land a standing crop or even the promise of labour services as security or collateral a collateral price is then fixed this is the conversion price used to calculate the amount of collateral that has to be relinquished to the lender given a certain amount of default clearly the lower the collateral price the larger the quantity of collateral that the peasant has to forfeit hence the underpricing of collateral amounts to the charging of an implicit interest a widespread feature of rural credit markets reported in many diverse studies bardhan and rudra 1978 myint 1964 raj 1981 roth 1979 and sivakumar 1978 to mention just a few is the underpricing of collateral an interesting attempt to bring collateral explicitly into a model of usury was made by bhaduri 1977 see also 1983 who argued that one of the reasons why landlords raise interest rates is in fact to encourage default and to claim ownership of the asset kept as collateral a sharp contrast to the lender s risk model this hypothesis has deservedly received much attention 1

a computable general equilibrium model of international sanctions in iran we detail recent international sanctions against the iranian economy and its government imposed by a subset of developed countries the effects of these sanctions on the iranian economy in general and upon upper and lower income rural and urban iranian households as well as the iranian government are modelled using a computable general equilibrium cge model we supplement the global trade analysis project 8 data set using income and expenditure shares from the urban and rural household income and expenditure survey from the statistical centre of iran sci the model is calibrated to simulate the effects of international sanctions as closely as possible we use endogenous trade taxes to simulate the effects of sanctions on iranian oil and petrochemical exports and iranian imports of petroleum products metal products and motor vehicles our study finds that international sanctions reduced aggregate iranian welfare by 14 15 rural households in iran suffered welfare losses which were almost double those experienced by urban households and the poorest urban and rural households experienced the largest welfare losses in the order of 5 10 but the government of iran sees a decrease in real revenue of 40 50 due to the large negative effect of sanctions on the iranian oil sector

on the optimality of resetting executive stock options the practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives our model shows that although the anticipation of resetting can negatively affect initial incentives resetting can still be an important value enhancing aspect of compensation contracts even from an ex ante standpoint in fact we find that some resetting is almost always optimal the relative advantages of resetting diminish with greater ability of managers to influence the resetting process greater relative importance of external factors on stock performance and lower costs of replacing incumbent managers

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

the termination of international sanctions explaining target compliance and sender capitulation abstract with the proliferation of sanctions after the end of the cold war the termination of these punitive measures has become a ubiquitous phenomenon in international politics yet research has hitherto almost exclusively focused on sanctions implementation and effectiveness whereas their termination has received little attention in this paper we draw on studies analyzing the varying duration of sanctions to examine under which conditions they end in contrast to prior research that has mostly treated the end of sanctions as a single category our analysis disaggregates sanctions termination by target compliance and sender capitulation we run a competing risks model using novel dyadic sanctions data and show that the determinants of both outcomes significantly diverge while poor economic health and high political volatility in the target country make it significantly more likely to comply political alignment between the sender and target and leadership changes in the sender country lead to a higher probability of sender capitulation