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Competition for natural resources and the hold-up problem

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  • Carsten Hefeker
  • Sebastian G. Kessing

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.

Suggested Citation

  • Carsten Hefeker & Sebastian G. Kessing, 2017. "Competition for natural resources and the hold-up problem," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 871-888, August.
    • Handle: RePEc:cje:issued:v:50:y:2017:i:3:p:871-888
    DOI: 10.1111/caje.12281
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    Cited by:

    1. Ramin Dadasov & Carsten Hefeker & Oliver Lorz, 2017. "Natural resource extraction, corruption, and expropriation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 809-832, November.
    2. Ramin Dadasov & Carsten Hefeker & Oliver Lorz, 2014. "Natural Resource Production, Corruption, and Expropriation," MAGKS Papers on Economics 201436, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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