A Theory of International Boycotts

Abdoulaye Ndiaye

No 18868, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper provides the first systematic analysis of international boycotts within a neoclassical trade framework. A coalition of households maximizes its own welfare subject to keeping the welfare of a foreign country below a tolerated level. I establish a general equivalence result: equilibria with such a boycotting coalition coincide with equilibria in which atomistic, price-taking boycotters maximize utility subject to fixed expenditure budgets on each country's goods and, equivalently, net spending budgets on each country's factor services. Optimal boycotts (i) take the form of prohibitions on importing foreign goods unless foreign comparative advantage is sufficiently large, and (ii) lead boycotters to increase their labor supply to spend more on domestic goods when income effects outweigh substitution effects. A boycott by all domestic households is equivalent to targeted import tariffs and to a voluntary export restriction by foreign firms covering the boycotted goods, and the optimal boycott mirrors the uniform structure of optimal import tariffs; however, the effectiveness of boycotts is diminished by leakage effects from nonboycotting households. Thus, while boycotts share key similarities with conventional trade policy instruments, they introduce complexities that position them as distinct tools of geoeconomic influence.

Keywords: Boycott; Sanctions; International trade (search for similar items in EconPapers)
Date: 2024-02
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