DP18868 A Theory of International Boycotts
This paper provides the first systematic analysis of international boycotts within a neoclassical Ricardian framework. I establish a general equivalence result that equilibrium outcomes with boycotts can be analyzed through either the fixed factor demands or fixed expenditures of the boycotting coalition, thereby clarifying the economic mechanisms behind boycotts. Optimal boycotts (i) take the form of prohibitions on importing foreign goods unless foreign comparative advantage is sufficiently large, and (ii) boycotters optimally increase labor supply to spend more on domestic goods. International boycotts are equivalent to certain forms of government-imposed sanctions or voluntary export restrictions, although their effectiveness is diminished by leakage effects from nonboycotting consumers. Thus, while boycotts share key similarities with conventional trade policy instruments, they introduce complexities that position them as distinct tools of geoeconomic influence.
