Sanctions, Inducements, and Market Power: Political Economy of International Influence

This paper argues that economics sanctions, whether positive or negative, require market power on the part of the sanctioning state(s) and entail distributional consequences. As a result, sanctions result in the growth of state power and the monitoring and punishing of one's own allies and citizens. Similarly, countermeasures on the part of sanctioned states also entail market power and result in both the growth of state power and unintended as well as intended distributional consequences. The political requisites for both sides imply that democracies have a more difficult time imposing sanctions and autocracies the easiest in adopting countermeasures. Since outcomes are the combined result of sanctions and countermeasures, and given the incentives of sanctioned states in adopting countermeasures, even comprehensive sanctions have differential consequences and result in targeted outcomes and targeted sanctions generate unintended collateral damage.