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.