The Geoeconomics of Contract Enforcement

Gerhard Toews, Elena Paltseva and Marta Troya-Martínez

No 1569, Working Papers from Barcelona School of Economics

Abstract: Historically, contract enforcement between multinationals and host governments relied on military power. In the late 1960s, Western Great Powers (WGP) – U.S., U.K., France – sharply reduced military interventions, increasing expropriation risk in weak-institution countries. We study the effect of this unanticipated global shift using microdata from the petroleum industry. Firms headquartered in WGP responded by delaying ("backloading") production by 2-4 years, converging to the delays already exhibited by other multinationals. Backloading resulted in annual revenue losses of one quarter billion US$ per country, largely offset by higher government rent-shares. These patterns are consistent with the formation of self-enforcing agreements.

Keywords: dynamic incentives; institutions; oil; political economy (search for similar items in EconPapers)
JEL-codes: D86 H20 L14 O13 P48 (search for similar items in EconPapers)
Date: 2026-03
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