International partnerships, foreign control and income levels: theory and evidence

Christa Brunnschweiler and Simone Valente

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: We analyze the effects of different regimes of control rights over critical resources on the total domestic income of open economies. Considering home control, foreign control, and international partnerships in a theoretical model with incomplete contracts and more productive foreign technologies, we show that (i) partnerships can be jointly optimal, (ii) foreign control is never optimal, (iii) assigning complete residual rights to foreign firms reduces domestic income via a Dutch-Disease mechanism. Empirical evidence using a new dataset on petroleum ownership structures for up to 68 countries between 1867-2008 shows that (i) international partnerships tend to generate higher domestic income than foreign control, and (ii) partnership and foreign control are linked to high or intermediate relative profitability of the domestic resource endowment, whereas home control is associated with low relative profitability.

Pages: 44 pages
Date: 2012-08-17
New Economics Papers: this item is included in nep-int
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http://www.svt.ntnu.no/iso/WP/2012/11_intpartnerships_CB_SV.pdf (application/pdf)

Related works:
Working Paper: International Partnerships, Foreign Control and Income Levels: Theory and Evidence (2011)
Working Paper: International partnerships, foreign control and income levels: theory and evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:nst:samfok:13412

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