Natural Resource Production, Corruption, and Expropriation

Ramin Dadasov, Carsten Hefeker and Oliver Lorz

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We develop a formal model that looks at the mutually endogenous determination of foreign direct investments in natural resource-rich countries, the decision of host governments to expropriate these investments, and the level of corruption. Higher resource production makes expropriation more attractive from the perspective of national governments. A low expropriation risk is in turn an important determinant of international investments and is therefore associated with high levels of production. Moreover, resource production leads to high levels of corruption. Our theoretical results are confirmed by estimations of a simultaneous equation model for 50 resource-rich countries in which we endogenize expropriation risk, corruption, and resource production.

Keywords: Natural resources; hold-up problem; foreign direct investment; corruption. (search for similar items in EconPapers)
JEL-codes: D73 F21 Q38 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014
New Economics Papers: this item is included in nep-env and nep-pol
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201436

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