Experience Open to Interpretation

US Presidents and Economic Coercion

Dawid Walentek

Ghent University

Puzzle

• What does Joe Biden make of the CNN news?
• Does it affect his behaviour in respect to sanctions?

Literature

• Current research on  the effects of sanctions on approval ratings is at odds (Whang 2011, Webb 2018)
• We know that high approval ratings are a 'desirable commodity' (Donovan et al., 2020)
• We also know that many factors drive approval (Wlezien, 2015, 2017)
• Yet, research assume that US presidents are not biased and able to interpret movement in approval ratings

Theory

• Formal model of beliefs updating (Fryer et al., 2019)
• Building blocks of the model:
• • signals open to interpretation
  • beliefs about audience costs for empty threats
  • beliefs about audience benefits for imposition
• Convergence on preferences for economic coercion
• Motivated by research on leaders beliefs about public opinion (Walgrave et al., 2023) and susceptibility to confirmation bias (Donovan et al., 2020)

Hypothesis

A political leaders is likely to impose economic sanctions if experiencing a period of lower approval ratings

Research desgin

Research design

• Event-study design
  • timing-based (Miller, 2023; Clarke and Schythe, 2020)
• Baseline one month before imposition
• Anticipation effect: a change prior to treatment

Results

• Dots to the left are leads
• Dots to the right are treatment effects
• We observe an anticipation effect
  • joint significance test for leads p<.05
• No audience effect  

Results

• Placebo test
• Random assignment of comparable number of treatment months
• Replicable (using my ORCiD)
• Random walk

Results

• Heterogeneity 1: majority imposed vs at least one imposed sanction
  • no difference
• Heterogeneity 2: majority security vs majority trade
  • anticipation effect present for security & absent for trade
  • US President play a pronounced role in respect to security issues
  • low power of the test
• Main findings robust to dropping FE, controls & presidents

Conclusion

• Suggestive evidence for an anticipation effect
  • US presidents act as if domestic audience benefits or costs (or both) are present
• No evidence for domestic audience effects
  • signal is too weak
  • costs and benefits balance out

Thank you