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Aidt, T. S., Albornoz, F. and Hauk, E.

Foreign in influence and domestic policy: A survey


Abstract: In an interconnected world, economic and political interests inevitably reach beyond national borders. Since policy choices generate external economic and political costs, foreign state and non-state actors have an interest in influencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes many forms. We distinguish three broad types of intervention strategies, (i) voluntary agreement interventions between the intervening foreign power and the target country, (ii) policy interventions based on rewarding or sanctioning the target country to obtain a specific change in policy and (iii) institution interventions aimed at influencing the policy choice by changing the political institutions in the target country (with or without a civil war). We propose a unifying theoretical framework to understand when and which form of foreign influence is chosen and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines. Foreign intervention plays a more important role for a proper understanding of domestic policy choices, for institutional dynamics and for internal conflict than is commonly acknowledged in both empirical and theoretical research.

Keywords: Foreign inuence, international agreements, institutions, aid, sanctions, conflict

JEL Codes: D70 D72 D74 F13 F23 F51 F53

Author links: Toke Aidt  


Open Access Link:

Published Version of Paper: Foreign Influence and Domestic Policy, Aidt, T. S., Albornoz, F. and Hauk, E., Journal of Economic Literature (2021)

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