International partnerships, foreign control and income levels: theory and evidence

Christa Brunnschweiler and Simone Valente

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze the effects of different regimes of control rights over critical resources on the total domestic income of open economies. We consider home control, foreign control, and international partnerships in a theoretical model where contracts are incomplete, resource exploitation requires local capital, and foreign technologies are more efficient. Enacting foreign control is never optimal, and assigning complete residual rights to foreign fi�rms reduces domestic income. Two testable predictions are derived. First, international partnerships tend to generate higher domestic income than foreign control. Second, the typical regime choice is either partnership or foreign control when the international relative pro�fitability of the domestic resource endowment is high or intermediate, and home control with low relative pro�fitability. We test these predictions using a new dataset on petroleum ownership structures for up to 68 countries between 1867-2008, �finding strong empirical support for the theoretical results.

Keywords: Property rights; control rights; income; oil; panel data (search for similar items in EconPapers)
JEL-codes: D23 F20 O13 (search for similar items in EconPapers)
Date: 2011-10-19
New Economics Papers: this item is included in nep-cis and nep-ifn
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Related works:
Working Paper: International partnerships, foreign control and income levels: theory and evidence (2012)
Working Paper: International Partnerships, Foreign Control and Income Levels: Theory and Evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34222

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