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Competition for natural resources and the hold‐up problem

Carsten Hefeker and Sebastian Kessing

Canadian Journal of Economics/Revue canadienne d'économique, 2017, vol. 50, issue 3, 871-888

Abstract: We study the role of competition for the hold‐up problem in foreign direct investment in resource‐based industries. The host country government is not only unable to commit not to expropriate investment ex post but also unable to commit to the provision of local resources. In the case of competition for local resources, this dual commitment problem triggers higher investment levels and increases host country revenues, but hurts profits of international investors. Concurrence pour les ressources naturelles et le problème du hold‐up. Les auteurs étudient le rôle de la concurrence pour le problème du hold‐up dans l’investissement direct de l’étranger dans les industries basées sur les ressources naturelles. Le gouvernement du pays hôte est incapable non seulement de s’engager à ne pas exproprier l’investissement ex post mais est aussi incapable de s’engager à fournir les ressources locales. Dans le cas de concurrence pour les ressources locales, ce double problème d’engagement enclenche des niveaux d’investissements plus élevés et accroît les revenus du pays hôte, mais réduit les profits des investisseurs internationaux.

Date: 2017
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https://doi.org/10.1111/caje.12281

Related works:
Journal Article: Competition for natural resources and the hold-up problem (2017) Downloads
Working Paper: Competition for Natural Resources and the Hold-Up Problem (2016) Downloads
Working Paper: Competition for Natural Resources and the Hold-Up Problem (2014) Downloads
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