FOREIGN DIRECT INVESTMENT AND THE RISK OF EXPROPRIATION

Jonathan Thomas and Timothy Worrall

No 268376, Economic Research Papers from University of Warwick - Department of Economics

Abstract: When an investor, for example a transnational corporation invests abroad it runs the risk that its investment will be expropriated. The host country although it might have a short-term incentive to expropriate has a long-term incentive to foster good relations to attract more investment in the future. This conflict between short-term and long-term incentives determines the type of contracts agreed by transnational corporations and host countries. In a model of the manufacturing industry with a continuous flow of investment it is shown that investment is initially underprovided, increases over time, tending, for certain parameter values, to the efficient level.

Keywords: Financial Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 37
Date: 1990-01-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Foreign Direct Investment and the Risk of Expropriation (1994)
Working Paper: Foreign Direcyt Investment and the Risk of Expropriation (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:268376

DOI: 10.22004/ag.econ.268376

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