Bargaining and Economic Coercion

International economic sanctions keep increasing their popularity, but empirical studies show that sanctions rarely persuade targeted countries to change their policies. If sanctions are ineffective, why do policy makers persist in using them? This paradox has led many scholars to argue that rather than being foreign policy oriented, sanctions have more to do with domestic politics or symbolism.Building on an alternative idea of sanctions as the visible part of a larger, more complicated interaction, this study proposes a bargaining theory that explains the sanctions puzzle. First, senders and targets bargain in the shadow of war, and sanctions appear ineffective because military threats prevent their full deployment. Second, senders frequently find it rational to overreach in their demands, selecting themselves into difficult disputes.The rigorous empirical analysis of 888 sanctions cases between 1971-2000 supports the theoretical argument. If the target does not have military preponderance and the sender seeks less extreme policy changes, sanctions can be reasonably effective foreign policy instruments.