Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data

Sergei Guriev, Konstantin Sonin and Anton Kolotilin

No w0115, Working Papers from New Economic School (NES)

Abstract: In this paper we study nationalizations in the oil industry around the world in 1960-2002. We show, both theoretically and empirically, that governments are more likely to nationalize when oil prices are high and when political institutions are weak. We consider a simple dynamic model of the interaction between a government and a foreign oil company. The government cannot commit to abstain from expropriation and the company cannot commit to pay high taxes. Even though nationalization is ine? cient it does occur in equilibrium when oil prices are high. The model?s predictions are consistent with the panel analysis of a comprehensive dataset on nationalizations in the oil industry since 1960. Nationalization is more likely to happen when oil prices are high and the quality of institutions is low even when controlling for country fixed effects.

JEL-codes: D23 L33 L71 P48 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2007-12
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Related works:
Working Paper: Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data (2011)
Working Paper: Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data (2008)
Working Paper: Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data (2007)
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