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Extra info for Economic Sanctions: International Policy and Political Economy at Work
Example text
Embargoes should substitute for military options, the first choice once verbal diplomacy breaks down for any sender. Baldwin (1985) was the peak of the literature that it followed, as it was comprehensive in its literature review and provided illustrative cases. We now review the contributions of this literature’s current foundation. 26 ECONOMIC SANCTIONS Hufbauer, Schott, and Elliott (1990) Hufbauer, Schott, and Elliott (HSE; 1990) compiled over 110 cases of economic sanctions since World War I, analyzing each case by assigning points.
If the target economy experienced a severe drop in GNP, or if the sender used very little of its GNP relative to the target’s loss, in percentage terms, the “contribution score” is three or four (success). 16 If the sanction episode receives an overall success score of nine or greater, it is termed a relative success; if the sanction scored eight or lower, the episode is a relative failure. Scholars have identified two potential sources of empirical problems in HSE. First, endogenity bias may exist in the data for economic success.
The target’s net welfare losses are defined by the trapezoid formed by areas b, c, and d. Elliott (2002) suggests that financial sanctions have market forces behind them that reinforce their effects: banks outside the sender– target dyad may perceive the target to be more risky due to financial sanctions. This risk augmentation is stronger when the target is a country with few alternative sources of financial markets. Market 22 ECONOMIC SANCTIONS forces are dictated by the elasticity of demand and supply, by the number of substitute markets available.