Alms and Influence: The Dynamics of Inducements and Concessions in International Politics

Abstract

When can economic inducements, including aid and investment, purchase influence abroad? I argue that the effectiveness of inducements hinges on the sender's ability to credibly withhold an inducement when the target does not concede. If the sender stands to profit from providing an inducement, it lacks the incentive to rescind it, rendering the inducement both credible, because it is interest-compatible for the sender to fulfill its promised inducement, and ineffective, as the target has no incentives to concede. To overcome this inducement dilemma and achieve a quid pro quo, the credibility of the promised inducement must come from the punishment for reneging, rather than the profit from delivering. I also posit that competition between multiple senders vying for influence over the same target can paradoxically alleviate the inducement dilemma by allowing the sender to credibly withhold inducements in the absence of concessions. I test these arguments using over 300 elite interviews and original datasets on Chinese infrastructure project contracts, international responses to China’s human rights practices, and China’s military diplomacy. I find Beijing's dual goals of addressing domestic economic problems and gaining international acceptance for its idiosyncratic governance models undercut each other. Consistent with the inducement dilemma, infrastructure projects effectively garner support for China's human rights practices only when these projects do not serve China's domestic goal of exporting excess industrial capacity. I illustrate Taiwan’s successful quid pro quo in using its investment for Lithuania to develop semiconductor production capabilities in exchange for a de facto embassy in Vilnius. I also show that under increasing animosity in U.S.–China relations, U.S. allies in Southeast Asia have to placate both China and the U.S. in order to maintain economic and security relations with each respectively. American allies in the region therefore acquiesce to China’s requests and engage in military exercises with China. This dissertation challenges the conventional wisdom in international relations by demonstrating that a signal’s credibility can sometimes undermine its effectiveness in the context of inducement. I also contribute to the scholarly and policy discourse by providing novel data regarding the Belt and Road Initiative’s intentions, implementation, and impact.