 How does expropriation affect FDI? A synthetic control analysis of oil and gas sector nationalizations in South AmericaBernd Lucke and Erik Rehfeldt European Journal of Political Economy, 2023, vol. 80, issue C Abstract: How do expropriations of foreign oil and gas assets affect the net inflow of FDI? We analyze political and legal developments which led to increased government control of natural resource extraction industries in South America in the early 2000s and discuss at which point in time foreign investors saw legislation as violating their legitimate property rights. We use synthetic control methods (SCM) to date expropriations and quantify their effect on FDI inflows in subsequent years. Strongly negative and statistically significant effects are found for Bolivia and Venezuela, with similar, but less conclusive evidence for Ecuador. SCM approaches which focus on structural characteristics and put little weight on pre-treatment outcomes are better equipped to detect the true “treatment” date than canonical SCMs. This is shown for Argentina where the 2012 nationalization of Repsol hardly affected FDI still down from the reputational damage inflicted by Argentina's 2001 sovereign default. Keywords: Expropriation; FDI; Synthetic control method (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:80:y:2023:i:c:s0176268023000903 DOI: 10.1016/j.ejpoleco.2023.102446 Access Statistics for this article European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung More articles in European Journal of Political Economy from Elsevier |
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