An Economic Theory of Foreign Interventions and Regime Change

I construct a theory of foreign interventions in which the preferences of the foreign country over alternative local groups are determined by each group's international economic ties. In equilibrium, the foreign country supports the group with which it has the strongest ties, since this is most influenceable from the outside. However this is counterweighted by the tendency of the domestic political system to favour the least influenceable group. I allow for a non-economic dimension of policy (geopolitics), and study how the saliency of this dimension may play in favor of the incumbent group. My results help interpret the economic rationale for many Western interventions in developing countries in the 20th century, and the role of economic nationalism in motivating the struggle for regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for specific local groups. I provide detailed historical evidence in favor of my arguments.regime change, foreign interventions, economic power, economic nationalism, Cold War, Latin America

Trade and the Skill Premium Puzzle with Capital Market Imperfections

An interesting puzzle is that trade liberalization in the 1980s and 1990s has been associated with a sharp increase in the skill premium in both developed and developing countries. This is in contrast with neoclassical theory, according to which trade should increase the relative return of the relatively abundant factor. We develop a simple model of trade with capital market imperfections, and show that trade can increase the skill premium in both the North and the South, and both in the short run as well as in the long run. We show that trade with a skill-intensive economy has two effects: it reduces the skilled wage, and thus discourages non talented agents out of the skilled labor force; and it reduces the cost of subsistence, thus allowing the talented offspring of unskilled workers to go to school. This compositional effect has a positive effect on the observed skill premium, possibly strong enough to counterweight the decrease in the skilled wage.Trade Liberalization, Skill Premium, Credit Market Frictions, Latin America

An economic theory of foreign interventions and regime change

I construct a theory of foreign interventions in which a home country's main trade partner may influence the course of regime change. The foreign country intervenes in support of the group that draws the largest gains from trade, since such a group is willing to concede most in trade agreements. But interventions are more than offset by the domestic political system, which supports in power the group who concedes least (economic nationalism). I allow for geopolitical competition between the main trade partner and a second foreign country, as well as for domestic ideological preferences over the two, and look at how geopolitical competition interacts with the economic mechanism described above. My results help interpret some of the patterns of Western interventions in the 20th century, and the role of economic nationalism in regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for incumbent elites, even when the oppositions did not have a strong communist ideology. I provide detailed historical evidence in favor of my arguments

An economic theory of foreign interventions and regime change

I construct a theory of foreign interventions in which a home country's main trade partner may influence the course of regime change. The foreign country intervenes in support of the group that draws the largest gains from trade, since such a group is willing to concede most in trade agreements. But interventions are more than offset by the domestic political system, which supports in power the group who concedes least (economic nationalism). I allow for geopolitical competition between the main trade partner and a second foreign country, as well as for domestic ideological preferences over the two, and look at how geopolitical competition interacts with the economic mechanism described above. My results help interpret some of the patterns of Western interventions in the 20th century, and the role of economic nationalism in regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for incumbent elites, even when the oppositions did not have a strong communist ideology. I provide detailed historical evidence in favor of my arguments

Decolonization: the Role of Changing World Factor Endowments

European colonialism had two key economic aspects: the extraction of colonial wealth by colonizers, and the relevance of trade for colonial economies. I build a simple model of colonialism which puts these two elements at centre stage. By controlling policy in the colony, the colonizer can appropriate part of her wealth; the colony, however, can stage a successful revolution at a stochastic cost. I assume there is some exogenous, non-contractible policy gain from independence, so that the colonizer is forced to concede it when the cost of revolution is low. I incorporate this mechanism in a three-country, Heckscher-Ohlin model where countries (the colonizer, the colony and a third independent country) can decide whether to trade with each other, and the colonizer can threaten to stop trading with the colony if she rebels. Thus, the attractiveness of revolution and the sustainability of colonial power come to depend on the capacity of the colony to access international markets against the will of the colonizer which, in turn, depends on the distribution of world factor endowments. I present historical evidence in support of my theory. My results have important implications for the debate on the economic legacy of colonialism.Colonial extraction, trade, decolonization

Growth, Import Dependence, and War

open2openBonfatti, Roberto; O'Rourke, Kevin Hjortshøj*Bonfatti, Roberto; O'Rourke, Kevin Hjortshø

Growth, import dependence and war: the risks of Chinese vulnerability

The stakes are high for China as it faces structural change and the increasing need to import raw materials, write Roberto Bonfatti and Kevin Hjortshøj O’Rourke

Three essays on international trade, foreign influence, and institutions.

This thesis is about the link between international trade (and the economic fundamentals that determine it) and a country's economic power. In Chapter 1 and 2, I define economic power as the capacity to impose - at little enough cost - harmful trade sanctions on other countries. I study how a "strong" country can use its economic power to influence policy and institutional change in a "weak" country. This foreign influence interacts heavily with domestic politics in chapter 1. Here, I study how an incumbent elite that has a disproportionate stake in gains from trade may use foreign influence to entrench itself in power. I argue that this can help explain the pattern of democratization in Latin America during the Cold War. In Chapter 2, I focus instead on how changes in economic power may lead to institutional change in international relations. I study how a weak country that is under the de jure domination of a strong country may find it easier to re-establish its sovereignty when the economic power of the strong country decreases. This allows me to explain various decolonization episodes in terms of changes in the economic fundamentals (mainly factor endowments) that determine trade, and thus economic power. A different approach to economic power is adopted in Chapter 3. This chapter is about the allocation of oil contracts to multinational companies in developing countries, and how is this determined by inter-governmental lobbying just as well as by economic factors. In this context, the economic power of an oil-importing country is defined as its capacity to lobby an oil-exporting government into a clientelistic allocation of contracts. I construct a model where this capacity is endogenously determined by the structure of the oil trade, by technology, and by the political myopia of the oil-exporting government

O uso de anaglifos na delimitação de unidades de mapeamento para levantamento semidetalhado de solos

The paper aims to show the utility of using anaglyph on the demarcation of soil mapping units; facilitating identification and enabling the expansion of information collection and observation points for larger areas. The use of photo-interpretation signifcantly reduces the time it would spend in recognition of all the properties and limits in the field. The work was conducted with the use of anaglyph in semi-detailed soil survey of the Lajeado dos Mineiros Watershed, in São José do Cerrito, Santa Catarina, covering an area of 2.877,37 ha. Data for soil classification was obtained through observation and collection in the field. The map of delineation of mapping units was produced using a scale of 1:50,000.O trabalho pretende mostrar a utilidade dos anaglifos na demarcação de unidades de mapeamento de solos, facilitando sua identificação e possibilitando ampliar informações de pontos de observação e coleta para áreas mais extensas. O uso da fotointerpretação reduz significativamente o tempo que se gastaria no reconhecimento de todas as propriedades e limites em campo. O trabalho considerou satisfatória a utilização de anaglifos para o levantamento semidetalhado dos solos da Microbacia de Lajeado dos Mineiros, no município de São José do Cerrito, no Estado de Santa Catarina, abrangendo uma área de 2.877,37 ha. Os dados para classificação dos solos foram obtidos através da observação e coleta de campo e o mapa de delineamento das unidades de mapeamento foi produzido na escala 1:50.000

Tax policy and the financing of innovation

We study tax policy in a Schumpeterian growth model with asymmetric information in the financing of innovation. Investors cannot a priori distinguish between more or less talented entrepreneurs. Net-worth allows talented entrepreneurs to self-invest and avoid being pooled with less talented entrepreneurs in the credit market. Increasing net-worth boosts innovation even when financed through higher profit taxes. Taxing consumption effectively raises net-worth and subsidizes profits simultaneously. Sufficiently taxing consumption implements the social optimum free of adverse selection. If forced to tax consumption less, the government implements a second best allocation with adverse selection when boosting net-worth enough to avoid adverse selection requires taxing profits excessively