Theocracy and Resilience Against Economic Sanctions
Alireza Naghavi () and
Giuseppe Pignataro ()
Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna
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.
JEL-codes: D74 D83 H10 P48 Z12 (search for similar items in EconPapers)
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Journal Article: Theocracy and resilience against economic sanctions (2015)
Working Paper: Theocracy and Resilience Against Economic Sanctions (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp977
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