Economic Implications of Postwar Strategic Partnership between the United States and Its Former Adversaries

Economic Implications of Postwar Strategic Partnership between the United States and Its Former Adversaries Public Deposited

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Creator

Watt, Christian G.
- Affiliation: College of Arts and Sciences, Department of Political Science

Abstract

I model strategic partnership's influence on economic interaction as a firm-level signaling game. The model suggests that the US strategic partnership signal can encourage economic interaction between the United States and its former adversaries that would otherwise have been forfeit to US rivals, thereby increasing broader US economic influence. The signal matters more in situations where firms are pessimistic about the favorability of a former adversary's economic state and the economic state is actually favorable. The signal also matters more in situations where expected firm profitability is low relative to the cost of entry--as expected profit (reward) decreases and cost of entry (risk) increases. In these situations, the strategic partnership signal can encourage market entry and, in turn, preserve gains that would otherwise be conceded to rivals. I then test several of the model's inferences with national-level, multiple interrupted time-series analysis and find preliminary support. Further research is warranted.

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