Targeted Sanctions and Redistribution

• In Event: Firms and the Political Economy of Regulation

Abstract

Targeted sanctions are often thought to be more efficient than broad-based sanctions at incentivizing policy changes in rival states. This paper develops a formal model that demonstrates that this conclusion holds only conditionally - i.e. only when there exist constraints on domestic redistribution, such as limits to fiscal capacity. If a state can redistribute value between domestic groups at low cost, then targeted sanctions will simply lead to higher levels of redistribution towards the targeted groups. This conditional fungibility of costs leads to a core result: targeted sanctions should be implemented against actors with limited capacity to redistribute, while broad-based sanctions should be used against actors with abundant capacity to do so. Further comparative statics are derived with respect to a number of important parameters, and the model's implications are discussed with reference to historical cases.

Author

• Jason Sanwalka Davis, University of Pennsylvania